Initial Coin Offerings continue to be under fire from the authorities. With multiple on-going cases making recent news, there still has been no slowdown in investors’ enthusiasm to take part in these crowd sales.
In the past week we have seen multiple court denials for motions of dismissal. It appears as though there is being no leniency shown to companies that flout the law. No doubt, these high profile cases will be used as examples for companies looking to scam investors in future ICOs. Here we take a quick look at two on-going cases being tried in the United States.
PlexCorps was an ICO that took place in 2017. This was a company that was illegally promoting the participation of their ICO to United States residents. When the SEC caught wind of what was occurring, they obtained an emergency halt order to serve PlexCorps.
The scam was as obvious then, as it is now. The company, based out of Quebec, was claiming that investors would realize a 1,354% return within 29 days. This kind of ludicrous claim didn’t sway thousands of investors from giving PlexCorps over $15 million, though.
The defendants had recently filed a motion for dismissal of the case due to ‘lack of personal jurisdiction’. This was shut down by the Judge presiding over the case.
What makes this case interesting is that their methods of promotion took place primarily via Facebook. Their ability to do so calls into question the screening process that Facebook uses to eliminate such acts. Although Facebook banned cryptocurrency ads entirely in early 2018, they have since re-allowed them to a certain extent.
This particular ICO has become one of the most well-known hosted to date. This is due to multiple reasons.
– First, for the $232 million dollars that they raised
– Second, for the bickering between the founding team, and the failure to deliver any semblance of their promises.
– Finally for lawsuits claiming the illegal distribution of securities within the United States.
In a recent motion to dismiss that case against them, the defendants argued that the ICO took place in a country outside of the United States. Therefore, the United States should not be able to enforce their own laws on them. As stated, this motion was denied. It was found that despite the foundation hosting the ICO being based in Switzerland, many integral aspects of the ICO took place within United States borders. Due to this they are able to be charge under United States laws. The recent court order can be found HERE.
It is due to cases such as these that the SEC remains wary of further legitimizing the blockchain industry. Regardless of any good that may come out of these cases being tried, it is unfortunate that so many investors have their money tied up in the situation.
On a positive note, cases like those detailed here have led to the advent of services such as Polymath, which plan to offer tokenized securities in a legal manner. It is looking increasingly important that services such as this are developed.
Overall, this is growth in the industry. Painful growth, but growth nonetheless.