Centra, an initial coin offering (ICO) noted for having been promoted by Floyd Mayweather, is now facing a class action lawsuit. The ICO is accused of violating securities laws by misrepresenting the cryptocurrency as comprising a utility-based token.
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The Suit Has Been Filed on Behalf of Plaintiff Jacob Zowie Thomas Resel
The action states state that “Between approximately July 30, 2017, and approximately October 5, 2017,” Centra violated the Securities Act through “rais[ing] over $30 million in digital cryptocurrencies by offering and selling unregistered securities.” The complaint adds that “There are conflicting reports as to the actual amount raised, some reports indicate the amount raised may have been closer to $50 million.”
The suit states that “The purported primary purpose of the Centra ICO was to raise capital to operate the ‘world’s first Multi-Blockchain Debit Card with a Smart and Insured Wallet’… In other words, the product to be offered was a debit card that would function on the Visa and Mastercard networks and allow instant transactions using digital currencies. Further, the Centra ICO claimed to be intended to raise capital to create an online marketplace called ‘cBay’ that would be similar to Amazon and eBay.”
The complaint describes the defendants as having “made a feeble attempt to portray the Centra ICO as a sale of ‘utility-based tokens’ that were ‘not securities, shares or investments’.” The suit alleges that the Centra ICO comprised “a clear offer and sale of securities” due to the defendants “hav[ing] explicitly referr[ing] to the ICO participants as ‘investors’,” in addition to “tout[ing]… that the CTR Tokens received in exchange for their investments would be worth more than the… [crypto]currencies invested.”
Centra Enlisted Celebrities to Leverage Their Social Media Presence in Order to Promote the ICO
The Centra crowdsale received endorsements from “brand ambassador” Floyd Mayweather, and DJ Khaled. The celebrity endorsements suggest that Centra hired the services of Crypto Media Group – a company considered to have sparked the recent wave of famed entertainers promoting ICOs.
The New York Times recently speculated that the endorsements may have distracted potential investors from critically evaluating the merits of the company behind the ICO – stating that such “lent a patina of credibility to a project… with more than a few problems, including a chief executive who does not appear to have been a true person.” The United States Securities and Exchanges Commission (SEC) has sought to crack down on the practice of ICOs enlisting celebrities to promote token sales, warning that advertising unregistered securities could result in legal repercussions.
The suit against Centra has been lodged during a period of increased scrutiny surrounding the operations of ICOs. The record-breaking Tezos crowdsale has become the recipient of several class-action lawsuits in recent weeks, following the company’s failure to develop and distribute the cryptocurrency. Earlier this month, the SEC announced that Munchee Inc. had refunded investors following the forceful shut down of the ICO by the SEC. The action taken against Munchee comprised the first instance in which the SEC sought to act against an ICO for which there are no outstanding allegations of fraud from customers.
Do you think that the ICO bubble is starting to pop? Or that a new industry is maturing as a consequence of regulatory scrutiny? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, Centra
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The post Centra ICO Faces Class Action Lawsuit, Accused of Violating US Securities Laws appeared first on Bitcoin News.
