Class Action Alleges Centra Tech’s $30M ICO Nothing More than a Sale of Unregistered Securities

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Centra Tech, Inc. and four individuals are staring down allegations presented in a proposed class action that they violated federal securities laws by raising $30 million in digital cryptocurrencies by offering and selling unregistered securities, what the defendants called “Centra Tokens.”

The complaint sticks on a period between around July 30 and October 5, 2017 during which the defendants received more than $30 million in digital cryptocurrency investments, an amount the complaint concedes has been disputed and may be closer to $50 million. The purpose of this Initial Coin Offering (ICO), the lawsuit explains, was for the defendants to raise capital to operate what they called “the world’s first Multi-Blockchain Debit Card with a Smart and Insured Wallet,” effectively a Centra Debit Card. From the lawsuit: 

“In other words, the product to be offered was a debit card that would function on the Visa and Mastercard networks and allow instant transactions using digital currencies. Further, the Centra ICO claimed to be intended to raise capital to create an online marketplace called ‘cBay’ that would be similar to Amazon and eBay. Additionally, Centra Tech recently claimed to be creating their own Centra Blockchain.”

According to the plaintiff, the defendants attempted to disguise Centra’s ICO as a sale of “utility-based” tokens that were not traditional securities, shares or investments. The lawsuit charges that the Centra ICO’s core offering—200 CTR Tokens for 1 Ether, another kind of cryptocurrency—was “a clear offer and sale of securities” because the defendants touted that the tokens received in exchange for initial investments would be worth more than Ether, Bitcoin, Litecoin and other digital monies.