On August 13, 2020, the U.S. Securities and Exchange Commission announced charges against Virginia-based Boon.Tech and its chief executive officer Rajesh Pavithran for fraud and registration violations in connection with a $5 million initial coin offering of digital asset securities.
According to the SEC’s from November 2017 to January 2018, Boon.Tech and Pavithran raised approximately $5 million by selling Boon Coins to more than 1,500 investors in the U.S. and worldwide to raise funding to develop and market a platform to connect employers posting jobs with freelancers seeking work. The order finds that the Boon Coins were offered and sold as investment contracts and were therefore securities, but that Boon.Tech and Pavithran failed to register the offering.
The Order also stated that there were the following false statements:
- Defendants claimed that Boon Coins were stable and secure because Boon.Tech’s platform eliminated volatility inherent in the digital asset markets by using patent-pending technology to hedge Boon Coins against the U.S. dollar, but there was no such technology;
- Defendants misrepresented to investors that Boon.Tech’s platform was faster and more scalable than its competitors because it was built on Boon.Tech’s own blockchain, but the platform was actually the same public blockchain as used by its competitors.
Without admitting or denying the SEC’s findings, Boon.Tech and Pavithran agreed to settle the charges by consenting to the issuance of the Order. It (i) requires Boon.Tech to disgorge the $5 million raised in the ICO plus prejudgment interest of $600,334, (ii) requires Boon.Tech and Pavithran to destroy all Boon Coins in their possession, 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, (iii) requires Pavithran to pay a penalty of $150,000, and (iv) bars Pavithran from serving as an officer or director of a public company.