Seattle-based eSports gambling startup Unikrn is the target of a lawsuit filed by one of its investors which charges the violated securities law in relation to the sale of its cryptocurrency, UnikoinGold.
Unikrn launched UnikoinGold last year as a cryptocurrency using the Ethereum blockchain network for use on the Unikrn gambling platform.
According to a report at ESPN, Las Vegas resident John Hastings purchased UnikoinGold tokens at the initial offering with 10 Ethereum, worth approximately $2,800 at that time.
His suit, filed in King County, Washington, alleges that statements made by Unikrn officials contradict the policy that the cryptocurrency was intended for gambling. The suit alleges that the continuous offering of these tokens to the public, the alleged intent for purchasers to resell them at a later date and a private presale to accredited investors before the coin was offered to the public make the cryptocurrency an investment security item and therefore the company violated Securities and Exchange Commission regulations.
“Defendants have crafted a flimsy facade that UKG Tokens are not securities by claiming they are utility tokens,” Hastings alleges in the complaint filing, which was obtained by ESPN. “In reality, the UnikoinGold ICO was an offer and sale of securities. Indeed, it is evident that investors were purchasing UKG Tokens with the expectation that those tokens would increase in value and become worth more than the virtual currencies invested.”
Hastings is seeking class-action status for all purchases of UnikoinGold. In a press statement, Unikrn officials acknowledged the suit and said Unikrn has retained Seattle-based law firm Perkins Coie to “vigorously defend” the company, ESPN reported.
In October, Unikrn announced it had raised 112,720 Ethereum inn its initial offering—worth about $31 million at that time—in a two-phase UnikoinGold initial coin offering that spanned 112 countries. Among the participating buyers in the first phase, an exclusive presale, were Mark Cuban and Ethereum co-founder Anthony Diiorio.