We have seen quite a few complaints involving ICOs in the past few months. Especially in the US, there is genuine concern as to whether or not most of these tokens are securities. It appears someone has filed a complaint against the Centra ICO, which garnered a lot of attention thanks to Floyd Mayweather Jr.’s involvement as a promoter. This development will certainly be interesting to keep an eye on.
Centra ICO is in Hot Water
It was only a matter of time until some of the more prominent ICOs faced legal scrutiny from the SEC. There have been a lot of successful projects which can clearly be considered securities offerings more than anything else. It is a worrisome development, but we’ve seen official complaints filed against these companies. Centra is the latest entity to deal with such a complaint, which shouldn’t really surprise anyone.
Most cryptocurrency enthusiasts will recall how Floyd Mayweather Jr. openly supported the Centra ICO on Instagram. It is evident the SEC doesn’t take too kindly to such things, which is why all American “idols” have been warned not to promote any of these projects in the future. While Mayweather’s endorsement may not have had much of an impact, the company went on to raise more than US$30 million during its initial coin offering.
The Centra ICO complaint touches upon a few different aspects of this crowdsale. For some reason, the team decided to label their ICO as a sale of utility-based tokens instead of the securities they truly are. In fact, the company specifically stated its tokens were not securities, shares, or investments. That was a clear lie, as these tokens were only sold under the premise that they would go up in value as time progressed. The endorsement by Mayweather Jr. has made that rather obvious.
Furthermore, it seems there is no Visa partnership, unlike what Centra had announced prior to and during its initial coin offering. A lot of debit card providers which held ICOs made such claims in the past, yet very few of them actually had any ties to Visa. There was also a lot of confusion regarding the Centra team members, as some of the people initially listed as employees are not even affiliated with the company. That’s a very disturbing development that may hurt the company’s chances of success in the long run.
To make matters worse, the bounty programs offered by Centra raise a lot of concerns as well. Paying bonuses to early token purchasers is also unacceptable, according to the complaint, and the paid endorsements by Mayweather Jr. were also problematic. All of those things clearly make Centra’s token a security rather than anything else. It is evident this may be a clear-cut securities violation in the eyes of the SEC.
The big question is how all of this will play out for the Centra team and their investors. We know the SEC does not look kindly on companies that violate securities laws, especially not if they used ICOs to do so. There are so many things about Centra which are in clear violation of the SEC’s rules, it’s almost impossible to point at one aspect in particular. We may very well see the SEC crack down on this project in a severe manner.
