The Securities and Exchange Commission announced today that it has reached settlements with two companies that sold digital tokens in initial coin offerings or ICO’s. Cannabis-related company Paragon Coin was one of the businesses investigated by the SEC.
The SEC said that Paragon raised approximately $12 million worth of digital assets to develop and implement its business plan to add blockchain technology to the cannabis industry and work toward legalization of cannabis. The SEC statement wrote that Paragon did not register its ICO pursuant to the federal securities laws, nor did it qualify for an exemption to the registration requirements.
“We have made it clear that companies that issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division. “These cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets.”
Paragon faces a $250,000 penalty and must compensate the investors. They must register the tokens as securities and file periodic reports with the SEC. “By providing investors who purchased securities in these ICOs with the opportunity to be reimbursed and having the issuers register their tokens with the SEC, these orders provide a model for companies that have issued tokens in ICOs and seek to comply with the federal securities laws,” said Steven Peikin, Co-Director of the SEC’s Enforcement Division.
Paragon’s CEO Jessica Ver Steeg would not comment on the settlement. However, it was well known that the money raised from the ICO was used to acquire a building in order to create a co-working space for cannabis startups in Los Angeles, called Paragon Space.
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Published: November 16, 2018
Founder & Interim Editor of L.A. Cannabis News