In the letter
- Paragon wanted to use blockchain to help the cannabis industry function better.
- The SEC called their ICO an unregistered security sale.
- Investors have been withdrawn from circulation.
In April 2020, ParagonCoin went bankrupt. The “decentralized solution for the cannabis industry,” which raised $ 12 million in an initial coin offering (ICO) in 2017, said it would file for bankruptcy after being unregistered for one by the Securities and Exchange Commission (SEC) Securities sale was tracked.
The legal move – and the founders’ physical move to Eastern Europe – meant that investors in the defunct project had little left for their investment.
Today, the SEC said It begins with the distribution of the $ 175,000 Paragon, which will be paid to aggrieved investors as a civil penalty.
ParagonCoin was part of the ICO boom of 2017. That was the year raised $ 257 million, received $ 232 million and raised $ 145 million to build new blockchains. By comparison, Paragon took in a relatively modest value of $ 12,066,000 , and other cryptocurrencies in exchange for the native PRG token as part of a presale and crowdsale that ended on October 15, 2017.
Paragon, founded by Jessica VerSteeg and her husband Egor Lavrov, promised to use it create more transparency for an under-regulated industry while creating a workaround for cannabis companies that do not have access to traditional banking services. Most pharmacies cannot accept credit or debit cards directly due to federal regulations, a problem shared by Nevada politicians, for example work to solve.
However, for Paragon, which had an aggressive marketing strategy, this seemed to be heading south quickly attract the attention of the SEC the wrong way. In late 2018, it was one of the first crypto startups to receive an SEC enforcement measure stemming from its ICO.
Paragon closed with the SEC and agreed to return investors’ funds, pay a fine of $ 250,000, and register PRG as collateral.
In March 2019 it became submitted documents with the SEC registering the PRG as collateral. After claiming a net loss of $ 11 million in 2018 tied to not only administrative costs from the SEC battle but also questionable expenses like $ 463,000 on marketing services to Lavrov, the company was able to get the funds the investor failed to return and only managed to send the SEC $ 175,000 of the promised $ 250,000 fine.
In late 2019, when investors started complaining about their lack of funds, it was Lavrov and VerSteeg, who finished 9th in season 28 of global competition The amazing race they were traveling in Europe with their teammate. They can be seen in a July 2019 post on Instagram, apparently in Ukraine (Lavrov is a Russian citizen). After that, VerSteeg – a former model with an A + social media game – almost stopped posting.
In April 2020, Paragon made it official and announced through its website that it would file for bankruptcy.
“We have never considered ourselves experts on US securities, so we sought advice from highly recommended lawyers who should help. Unfortunately, they have misled and failed us.” Home page read. “We did our best to get the product to market, but most of our resources have been devoted to litigation and compliance requirements.”
Today’s action by the SEC moves the US Treasury Department’s $ 175,000 Paragon into a “fair fund” that the SEC uses to repay investors or bring back profits. A Civil action is in progress.