A California federal court has given class certification to a lawsuit filed against ParagonCoin, a digital currency startup that raised over $70 million in an illegal ICO. However, the class certification only applies to investors based in California.
ParagonCoin held its ICO from August 2017, selling PRG tokens to investors. It lured the investors with promises of using blockchain technology to revolutionize the cannabis industry. The company also got into real estate, developing a co-working space for cannabis startups to build on their ideas. The startups would supposedly use the PRG tokens to make rent and other payments.
The case against Paragon was filed in January 2018 at a court in the Northern District of California. The plaintiff, Astley Davy, accused the company of violating the Securities Act by selling unregistered securities.
U.S. District Judge Jeffrey White has now given class certification to the lawsuit, but only for California investors. Despite having operated from California, ParagonCoin sold the tokens over the internet, Judge White stated.
He added, “Plaintiffs concede there may be class members in all 50 states and concede that laws governing the state law claims at issue differ among jurisdictions in such a way that a true conflict exists.”
ParagonCoin was one of the several startups that took advantage of the ICO hype in 2017 to raise tens of millions of dollars from investors. The firm was founded by former model Jessica Versteeg who acted as the CEO, and her Russian millionaire husband Egor Lavrov.
Just like PlexCoin, another digital currency scam, the company relied on celebrity endorsements, recruiting hip hop musician The Game. The rapper was included as a defendant in the lawsuit against the company.
ParagonCoin conducted its pre-sale between August 15, 2017 and September 15, 2017. It purported to have sold 70 million PRG tokens which it priced between $0.75 and $0.90. After the presale, the tokens went for $1 on the first day, with a $0.05 increase per day thereafter.
ParagonCoin promised to use blockchain technology to revolutionize the cannabis industry. According to its mission statement, it would “pull the cannabis community from marginalized to mainstream by building blockchain into every step of the cannabis industry and by working toward full legalization.”
ParagonCoin was one of the first digital currency startups that the SEC pursued for issuing unregistered securities. The company settled with the regulator in November 2018, agreeing to refund its investors.
In April 2019, the company revealed that it had put up its co-working space for sale. The building in Los Angeles was going for $4.2 million, with the funds set to go towards offsetting the huge losses the company recorded.
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