Stephen Palley, a prominent lawyer in the blockchain space, has just announced that a Federal Class Action lawsuit has been put forward against Atonomi Token. The lawsuit accuses the company of holding an unregistered security token offering.
Atonomi Token held its crowd sale in mid-2018 and raised some $25M. However, now that token offering is coming under fire in a new Federal Class Action lawsuit.
The lawsuit may force Atonomi to return all of the $25M it raised during its unregistered token sale. The lawsuit claims that the sale was for a security token which was unregistered.
According to Stephen Palley, a lawyer specializing in the blockchain space, Atonomi was supposed to register with Washington State or the Federal government but failed to. The lawsuit claims that Atonomi tokens have no substantive utility other than as a vehicle of investment, and therefore needed to be registered.
The lawsuit also claims that Atonomi failed to lock-up the tokens 12 months after the sale. Being a class-action lawsuit, many other affected participants of the token sale are looking to get their money back.
The Fate of Other ICOs
Now that the SEC and other regulatory bodies have been cracking down on unregistered securities, the ICO industry has really slowed down. Many investors are jumping ship entirely and instead are focusing their efforts on registered security token offerings (STOs).
If Atonomi is successfully sued and found liable, it would be yet another company feeling the squeeze from regulators. In short, it should be a time of pause for the ICO industry. It’s becoming more and more clear that ICOs are an outdated model and a riskier one. Security tokens provide us with a new avenue for legal investing in the blockchain space.
Although it’s still unclear Atonomi Token will be forced to return the $25M raised, the news should cause the ICO sector to rethink its strategies and instead begin to comply with regulators more effectively.
Do you think Atonomi Token will be forced to return all of the proceeds from its crowd sale? Let us know your thoughts below.
Image courtesy of ICO Drops.