The creators of Elastos (ELA) and the cryptocurrency exchange Huobi may be in legal hot water, after Elastos ICO investors accused them of hosting an unauthorized securities sale.
The investors have asked the New York Supreme Court to summon the the Elastos Foundation and team members, as well as Huobi and its US partner, HBUS, to answer their complaints, according to a leaked summons filing. A class-action lawsuit led by plaintiff Mark Owen claims that the Elastos ICO – which took place in 2018 – violated Section 5 of the Securities Act 1933, mandating all sales to register first with the SEC.
The summons claims that the token distribution was an unregistered US securities sale. The filing alleges that ELA tokens were sold on the premise that they were an investment, which would increase in value as Elastos developed its ecosystem and user demand increased.
The document says that neither Elastos or Huobi registered the ICO with the SEC. The whitepaper describes ELA tokens as utility tokens, used for trading and exchanging value on the Elastos blockchain as well as to pay for network fees. Holders were encouraged to participate in a three-year lockup period and earn 6% returns on their assets; the project announced that it was ending the scheme in October.
“The defendants brazenly disregarded these well-established U.S. securities laws by, inter alia, failing to register ELA securities with the SEC,” the summons reads. “No defendant in this action was registered with the SEC as a broker or dealer as required by law to legally sell securities in the United States.”
Elastos, originally launched in China, wants to build a “blockchain-powered world wide web.” The ICO, which ran in January 2018, sold 2M ELA tokens. Although investors from China were not allowed to participate, there were no such restrictions against US citizens.
Received on January 31st, the filing has yet to be signed off by the county clerk’s office. It is...