The US Securities and Exchange Commission (SEC) has charged Virginia-based tech firm Boontech and its Chief Executive Officer, Rajesh Pavithran, in a $5 million fraud case.
The charges relate to an initial coin offering (ICO) wherein the company raised $5 million from 1,500 financial specialists in exchange for ‘Boon Coins’, reported Bitcoin news. Pavithran and the company, in exchange, assured to develop a platform that connects job-posting employers and freelancers.
The SEC order states that the alleged offences were committed between November 2017 and January 2018. Boontech failed to register the offering (Boon Coins), which were "offered and sold as investment contracts and were, therefore, securities.”
The US federal government agency also found some false and misleading statements made by Pavithran and his company, including claims like “Boon Coins were stable and secure”.
Furthermore, Pavithran and Boontech also claimed that “their platform eliminated volatility inherent in the digital asset markets by using patent-pending technology to hedge Boon Coins against the US dollar, when in fact Boontech had no such patent-pending technology”.
The order also finds that Boontech and Pavithran misrepresented to investors that Boontech’s platform was faster and more scalable than its competitors because it was built on Boontech’s own blockchain when in reality the platform was being developed on the same public blockchain as its competitors.
“Investors are entitled to truthful disclosures from issuers of securities, whether digital or otherwise,” SEC Enforcement Division’s Cyber Unit Chief Kristina Littman said. “Pavithran and Boontech defrauded investors by convincing them to fund this endeavour based on the allure of innovation that simply did not exist,” she further added.
The SEC also found that Pavithran and Boontech violated the antifraud and registration provisions of the federal securities laws.
Boontech, in its defence, did not admit or deny the findings and agreed to settle the charges by consenting to the issuance of the order, which requires Boontech to disgorge the $5 million raised in the ICO plus prejudgment interest of $600,334.
The order also requires Boontech and Pavithran to destroy all Boon Coins, issue requests to remove Boon Coins from any further trading on all third-party digital asset trading platforms, and refrain from participating in any future offerings of digital asset securities.
Further, the order requires Pavithran to pay a penalty of $150,000, and bars him from serving as an officer or director of a public company.
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