New Jersey sues blockchain firm for selling unregistered securities
The chief of New Jersey Bureau of Securities has filed a case against Pocketinns, a blockchain company and its CEO, Sarvajnya G. Mada. The suit alleges the firm has sold more than $400,000 of unregistered securities, which is a violation of New Jersey Uniform Securities law.
The Delaware Corporation company launched, Pocketinns, on July 23, 2015, in Princeton, New Jersey. The company has allegedly never been registered by the New Jersey Bureau of Securities. By carrying out business without registration, they violated the following rules as stated in the complaint:
“…each offer and sale of unregistered securities by Mada and Pocketinns through Mada constitutes a separate violation of N.J.S.A. 49:3 and is cause for imposition of civil monetary penalties for each separate violation pursuant to N.J.S.A. 49:3-70.1.”
According to the complaint, the defendants were selling the securities in the form of cryptocurrency known as PINNS tokens through an initial token offering (ITO). The offering was carried out from January 15 to 31, 2018, where they managed to raise $410,000.
Pocketinns claimed that this offering was to raise capital for the development of an online market place where the users will be able to use the PINN Tokens.
Among the charges against them was that Pocketinns and Mada had sold the securities to 217 investors without verifying whether the investors were accredited. The organization took advantage of an exemption from registering securities with the Securities and Exchange Commission and New Jersey Bureau of Securities.
This exemption, however, requires an individual to ensure that all investors are accredited. Mada confessed that no deliberate steps were taken to ensure the latter. It was later found out that only 11 investors had the necessary documentation proving they were credited.
The suit alleges that Pocketinns aimed to raise $46 million from the sale of up to 30 million PINNS Tokens that could be purchased using Ether. Authorities later learned that almost all the funds ($410,000) raised from investors were used in funding the business. Ethereum’s decline in market value since the ITO also led to the depletion of these funds.
Early June, the SEC filed a complaint against a crypto company, Kik. The company was accused of conducting an Illegal $100 million securities offering of digital tokens without registering their offer pursuant to the U.S. security laws.
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