Paragon Unregistered Securities Will Be Refunded to Investors, Pending Application Approvals
- Paragon is a cannabis-based company.
- Unregistered securities cannot be sold without authorization from the SEC.
The Securities and Exchange Commission (SEC) is a necessary part of the financial sector, outlining exactly how digital tokens are meant to be sold, among other duties. Any security token must fall in line with the registration requirements of the SEC, or it violates the regulations set forth by the SEC and cannot operate.
Unfortunately, Paragon’s security token was recently evaluated, only to find that their offering included unregistered securities.
Since all securities must be registered with the SEC, the cannabis-focused company must now start refunding investors that participated in their initial coin offering. Investors who participated will need to apply for a refund.
On Paragon’s website, the company explains that they are now in the mandated Claim Period. The recession order indicates that anyone who made a purchase during the ICO will need to fill out a form to get their money back from their Paragon Coin (PRG) investment. This period will only last until November 21st, 2019. If investors do not submit their refund applications by the deadline, they may not end up receiving a refund.
Information from CoinMarketCap indicates that the PRG token is trading at $0.03 each, though it was once at $10 per token. Interestingly when the SEC decided to take action against the token, it skyrocketed, reaching a 52-week high on YoBit.
Over 8,000 people decided to invest in the ICO, which included many people in the United States. Through their efforts, the investors brought in $12 million in investments. The ICO ended towards the end of 2017, around the same time that Bitcoin was reaching a high of its own, and just after the DAO report. Clearly, the investors weren’t that concerned about a warning issued by the SEC that stated specifically that the tokens would be considered securities, because they still chose to invest.
Paragon ultimately settled the case with the SEC, though it comes with a few stipulations. Through this agreement, the cannabis company must:
- Refund the investments made by consumers
- Registered the security tokens, as dictated under the Securities Exchange Act of 1984
- File a report at least once a year with the SEC
- Pay a total fine of $250,000
The SEC sent a letter to ParagonCoin Limited President – Jessica VerSteeg Lavrov – earlier this month. The letter showed the frustration of the SEC, especially considering the delays for review. Without compliance to the requests of the SEC, Paragon was at risk of the bank deciding to “terminate our review and will take further steps as we deem appropriate.”
The letter goes on, explaining that the SEC intended to release all communication between themselves and Paragon, including the letter, without compliance. Clearly, this threat of disclosure had the intended effect. In fact, since the letter, VerSteeg even deleted some of the social media accounts she holds personally. However, the Paragon accounts are presently active.
At this point, the only real question is whether Paragon actually has the funds to return to the investors who submit applications. After all, in a Form 10 that the company filed with the SEC, Paragon stated that they had
“historically experienced recurring losses and negative cash flows from operations.”
As of December 31st of last year, the company stated that they had $14,863,257 in their possession, which was a combination of cash and cash equivalents. They also held just over $54,000 in cryptocurrency at the time, though it is unclear if the value of that cryptocurrency has risen since the filing.