Centra Tech has been hit with a class-action suit over its $30 million ICO from an “alleged purchaser of Centra Tokens.” The suit centres on claims that the token sale was an unregistered sale of securities, and therefore in breach of U.S. securities regulations.
Although the CTR Tokens were issued as “utility tokens” for use within the platform, the plaintiff claims that the ICO was actually “an offer and sale of securities,” pointing to statements made by Centra that investors would be able to “trade them on cryptocurrency exchanges for a profit.”
SEC On The Offensive
The SEC has begun to step into the ICO space to enforce this distinction. In a recent statement SEC Chairman Jay Clayton said:
While there are cryptocurrencies that do not appear to be securities, simply calling something a “currency” or a currency-based product does not mean that it is not a security.
adding that an ICO must either “demonstrate that the currency or product is not a security” or “comply with applicable registration and other requirements under our securities laws.”
The recent Munchee ICO learnt this the hard way when it was hit with a “cease and desist” order after regulators determined its token sale amounted to unregistered securities.
Centra is developing a debit card to be used with cryptocurrencies. Its ICO garnered a lot of publicity after it was promoted by boxer Floyd Mayweather and music producer DJ Khaled.
The case also alleges that Centra may have been overstated its existing relationships with Visa and Mastercard and misled investors over the team they had in place.
The Centra team have issued a statement, saying it “disputes the allegations in the complaint.”