Unikrn, a Seattle-based e-sport betting startup that conducted an initial coin offering (ICO) last year, is now facing a class action suit that accuses it of violating securities law in the U.S.
John Hastings, a Las Vegas resident and the lead plaintiff, filed the case with a court in the Washington State on Aug. 13, and alleged Unikrn and its founder Rahul Sood sold unregistered securities to the public via the ICO for its blockchain-based UnikoinGold Tokens (UKG).
Hastings, himself a participant in the ICO, argued that the UKG token should be treated as a security since investors were made to expect that the tokens "would increase in value and become worth more than the virtual currencies invested."
He further claimed that Unikrn has "crafted a flimsy façade that UKG Tokens are not securities by claiming they are 'utility tokens.'" Sood said in a news report from Geekwire on Thursday that Unikrn is "aware of the lawsuit" but declined to give further comment on the case.
As previously reported by CoinDesk, Unikrn collected 112,720 ethers via its ICO from September to October in 2017, which was worth around $31 million at the time.
Based on a file submitted by Unikrn to the U.S. Securities and Exchange Commission (SEC) on Oct. 6, the firm also raised at least $16 million from accredited investors through investment contracts known as SAFT – Simple Agreement for Future Tokens.
Founded in 2014, Unikrn planned last year to launch its own token for a blockchain-based betting platform and subsequently conducted the ICO to raise funds for the project's development.
The ICO was notably backed by "Shark Tank" VC Mark Cuban, who confirmed with CoinDesk his participation in the offering – a first for the owner of the Dallas Mavericks NBA franchise. "High risk. High reward," he commented at the time.
Following the token sale, UKG was listed for trading on several crypto exchanges including the U.S.-based Bittrex.
The case was filed at a time when the price of UKG declined from its all-time-high around $2 early this year to $0.05 as of press time according to data from CoinMarketCap, reflecting an over 95 percent drop.
It is yet another class action lawsuit filed by investors against ICO projects they invested in.
Just last week, a court in California blocked a move that sought to dismiss a class action case alleging that the ICO conducted by the Tezos Foundation violated securities laws in the U.S.
Read the full complaint below:
Justice lady image via CoinDesk
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