The Paragon coin was touted as the answer to a fragmented marijuana industry when it first entered the market late last year. The Paragon network would encompass the entire seed-to-shelf process and provide marijuana users with some much-needed transparency within the growing business sector.
The coin’s white paper showcases the many shortcomings of the marijuana industry and offers, what at least seem like, reasonable solutions to the industry’s current issues.
The project promised to eliminate problems such as the current banking scenario or lack thereof. In many states, Marijuana-related businesses are unable to possess or operate bank accounts because marijuana is still considered a schedule one drug by the federal government. The platform claimed to eliminate this situation by creating an all-inclusive marijuana ecosystem. This would allow users to monitor the production, distribution, and quality of their product without the need for third-party organizations.
The Paragon project received a strong public response and successfully raised over USD 70M during their 2017 ICO. At first, the project seemed to be a success, but it wasn’t long before inconsistencies began to appear. These inconsistencies eventually raised the alarms of investors.
Paragon now faces a class action lawsuit from investors who claim they were the victims of fraud due to misrepresentation. Let’s take a look at how the Paragon coin saga developed and how a former pageant winner and famous rapper helped to push the project onto the public
The project’s director, former Miss Iowa, Jessica VerSteeg, was keen on creating something special and not just “another pot coin” as she was quoted stating in an August 2017 interview. She explained to potential investors how Paragon would streamline the marijuana industry for the twenty-first century. She pointed out inefficiencies in the distribution process, and how Paragon could eliminate these concerns through the implementation of a blockchain-based logistic chain.
To help her in her promotional endeavors, VerSteeg sought out some additional star power. Eventually, she linked up with the rapper the Game. The Game burst onto the hip-hop scene after signing with Dr. Dre’s record label, Aftermath Records, in 2002. He is also one of a handful of artists to have two albums debut in the number one spot on the US Billboard 200 chart.
Soon after learning about Paragon, the Game joined the project’s advisory board. He then began promoting the Paragon platform heavily on both his and VerSteeg’s social media accounts. Both VerSteeg and the Game have significant social media followings.
The duo appeared on each other’s social media accounts on numerous occasions to promote the project. The final cross-promotion occurred on the day of the Paragon ICO launch with the Game appearing on VerSteeg’s Twitter feed to encourage investors to participate in the fundraising event. These actions would eventually lead to the Game joining in Paragon’s legal woes.
The ICO was completed successfully, and everything seemed as if it was going according to plan. That was until Paragon used investor’s funds to make numerous unexplained real estate investments at the beginning of this year. This news prompted a backlash from investors who felt that their funding should go directly to creating an alternative financial and tracking system for the Cannabis industry as promised.
At first, there was speculation that the real estate was part of the ParagonSpace project. This project was to be a large marijuana-based industrial park. Here cannabis companies could co-exist and work synergistically. However, it now appears that this was not the case and the investors are suing to get their funds back.
Paragon Coin ICO Legal Troubles
According to a story first reported by Blast in January, Paragon and the Game are the focus of a multi-million dollar lawsuit. Originally, the Game was not included in the lawsuit but was added in March after investors decided that his promotional efforts directly contributed to their loss of funds.
The lawsuit claims a myriad of reasons including misrepresentation, misuse of funds, and illegal fundraising. The California lawsuit also claims that Paragon failed to register their ICO with the Securities and Exchange Commission (SEC). The SEC ramped up their ICO monitoring efforts at the end of last year, after receiving numerous complaints of fraudulent ICOs.
Paragon Coin Defends their Decisions
Responding to the allegations of improper fundraising, VerSteeg told Business Insider that she followed all of the legal requirements at the time, and that the platform is fully compliant with all applicable laws regarding the ICO process. It now appears that her statements will be tested in a California courtroom as parades of investors are now claiming that the celebrity duo duped them into investing.
Paragon ICO – Security?
Whether or not the Paragon ICO falls into the securities folder is yet to be determined. If it’s found to be a security, both the Game and VerSteeg are looking at some serious financial and legal ramifications. Numerous disclosures and consumer protection safeguards must accompany all security offerings. If it’s determined that they failed to meet these requirements, the Paragon project could go up in smoke.