A federal judge in California approved a class action lawsuit by investors alleging that the crypto-cannabis company Paragon Coin Inc. violated federal securities laws in its 2017 Initial Currency Offering (ICO) in which it raised $70 million.
Paragon Coin introduced its “PRG” tokens as a coin for the cannabis industry and hired popular rapper The Game to promote the offer.
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On June 24, federal District Judge Jeffrey White approved the plaintiffs’ petition on their federal Bitcoin Future claims, however, he denied the state-level complaint requests on behalf of investors based outside California.
While the lawsuit argues that Paragon Coin claimed to have issued PRGs from its California headquarters, Judge White noted that “the ICO gave rise to the plaintiffs’ claims and the purchases of PRG tokens were made over the Internet.
“Plaintiffs claim that there may be plaintiffs in all 50 states and recognize that the laws governing the state complaints in question differ among the jurisdictions in such a way that there is a real conflict,” the judge added.
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Paragon Coin promoted by The Game
The class action was first filed against ParagonCoin in January 2018, with investor Astley Davy claiming that Paragon Coin should be forced to surrender its profits for allegedly failing to register its token sale with the Securities and Exchange Commission (SEC).
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The lawsuit noted that PRG promoted itself as a currency for the cannabis industry, adding that the company had hired the prominent rapper The Game to promote its token sales, who became involved in the lawsuit later that year.
In November 2018, ParagonCoin was one of two ICO issuers against which the SEC imposed civil penalties solely for failing to register its token sale, with compliance actions described as “first” by the regulator at the time.