The United States Securities and Exchange Commission (SEC) jointly charged Virginia-based Boontech and CEO, Rajesh Pavithran for fraud and registration violations. The charges stem from an initial coin offering (ICO) that raised $5 million from 1,500 investors around the world in exchange for Boon Coins.
In return, Pavithran and his company promised to develop and market a platform that connects employers posting jobs with freelancers seeking work. The SEC says that the alleged offenses were committed between November 2017 and January 2018.
According to the SEC order, “Boon Coins were offered and sold as investment contracts and were, therefore securities.” The order states that both Boontech and Pavithran failed to register the offering.
Furthermore, the order finds that Pavithran and Boontech made “false and misleading statements, including claims that Boon Coins were stable and secure.”
According to the SEC, Pavithran and Boontech also claimed that “their platform eliminated volatility inherent in the digital asset markets by using patent-pending technology to hedge Boon Coins against the U.S. dollar, when in fact Boontech had no such patent-pending technology.”
The US regulator also deemed Boontech’s claims that its platform “was faster and more scalable than its competitors because it was built on Boontech’s blockchain” as another representation.
Instead, the SEC determined that “the platform was being developed on the same public blockchain as its competitors.”
In a statement, Chief of the SEC Enforcement Division’s Cyber Unit, Kristina Littman said:
“Investors are entitled to truthful disclosures from issuers of securities, whether digital or otherwise. Pavithran and Boontech defrauded investors by convincing them to fund this endeavor based on the allure of innovation that simply did not exist.”
According to the SEC, Pavithran and the tech company violated the antifraud and registration provisions of the federal securities laws.
Meanwhile, the SEC order reveals that both Boontech and Pavithran, “agreed to settle the charges by consenting to the issuance of the order.”
Consequently, Boontech is now required “to disgorge the $5 million raised in the ICO plus prejudgment interest of $600,334.”
The order requires Pavithran to pay a penalty of $150,000 and bars him from serving as an officer or director of a public company.
Finally, Boontech and Pavithran must destroy all Boon Coins in their possession and issue requests to remove Boon Coins from any further trading on all third-party digital asset trading platforms.
The order also bars the duo from participating in any future offerings of digital asset securities.
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