The U.S. District Court for the Central District of California has summoned two companies sued by aggrieved investors over an unlawful initial coin offering (ICO). The two, video games marketplace OPSkins Group and virtual items marketplace Worldwide Asset Exchange (WAX), are expected to respond to the summons within 21 days. The summons is a response to a lawsuit filed by two investors who accuse the two entities of violating securities laws by selling unregistered securities.
The plaintiffs are Crypto Asset Fund, LLC and Digital Capital Management, LLC, two companies that invested in the WAX tokens in its 2017 ICO. According to court documents seen by Cointelegraph, the two companies invested $1.2 million worth of Ether in exchange for WAX tokens.
The plaintiffs accuse the OPSkins team of devising the WAX platform to “facilitate and further their highly profitable online gambling operations and to fraudulently raise tens of millions of dollars from investors by offering and selling unregistered, non-exempt securities in violation of federal and state law.”
OPSkins is further accused of promoting and facilitating underage and other illegal online gambling.
The plaintiffs further claimed that from their illegal sale of unregistered securities, OPSkins raised a staggering amount of money. Quoting an article by the Business Insider, they claim the money raised was $68 million. However, in an interview with PC Games Insider, OPSkins CEO and WAX President Malcom CasSelle claimed to have raised over $150 million from the sale of WAX tokens.
The lawsuit claimed, “In addition to failing to disclose to the investing public that they were offering and selling unregistered, non-exempt securities which bore massive risk of principal loss in violation of federal and state law, Defendants deliberately withheld material information from investors, including Plaintiffs, regarding the true and complete nature of their business operations, including the use of their platform and services for underage and other illegal online gambling.”
OPSkins and WAX are accused of violating the Securities Act of 1933 and California’s Unfair Competition Law. Additionally, the plaintiffs accuse them of breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, conversion, promissory estoppel, fraud, and negligent misrepresentation. The plaintiffs sought compensation for lost profits as well as an order prohibiting the two companies from selling unregistered securities.
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