Another cryptocurrency start-up is coming under fire for promoting an alleged investment scam. Kowala SEZC, a small company that was hoping to launch its own kCoin digital currency, is being sued by Merkamerica Inc for supposedly making promises it looks like they will never keep.
Merkamerica claimed in a California federal court that Kowala’s three top executives promised them kCoin was just months from launching in January 2018, and solicited a $308,000 investment for the right to mine the new digital currency.
More than a year later, the crypto has still failed to launch, and Merkamerica is unhappy with how it’s bet has turned out. “Merkamerica’s entire investment was based on a big lie,” complaint states.
Of the promises they now believe were lies include a promise that kCoin would be a stablecoin that could generate profits, and a promise of discounted tokens for early investors. Merkamerica also alleges the three Kowala executives, Vice President of Business Development Walker Willse and co-founders Eiland Glover and John Reitano, did not inform them that their entire investment could be lost if things go south.
“Had Merkamerica known the true facts, it would not have invested in Kowala SEZC,” the suit states.
Using recent decisions by the U.S. Securities and Exchange Commission (SEC), they also blast Kowala for violating securities laws. They believe kCoin should have been considered a security based on the companies original promises, stating it should be considered “[1] an investment of money [2] in a common enterprise [3] with an expectation of profits produced by the efforts of others.”
Once the case is prosecuted, it will be interesting to see if Merkamerica can prove that this was a flat out scam, or rather, if this was a business plan that simply didn’t work out.
If it’s the former, this could look a lot like the case of Crypto Brahma. The social media influencer promised to invest money sent to him to make profits for everyone involved, but mismanaged the funds and scared everyone into thinking it was an exit scam. That didn’t turn out to be the case, but things certainly didn’t work out the way everyone would have liked.
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