NJ Bureau of Securities goes after blockchain-driven marketplace offering “PINNS Tokens”

Maria Nikolova

Pocketinns and its president Sarvajnya Mada are alleged to have offered and sold unregistered securities from New Jersey in the form of a cryptocurrency called “PINNS Tokens.”

Attorney General Gurbir S. Grewal and the New Jersey Bureau of Securities within the Division of Consumer Affairs announced on Thursday that the State filed a three-count lawsuit against Pocketinns, Inc., a Princeton-based blockchain-driven online rental marketplace, and its president Sarvajnya G. Mada. The lawsuit alleges that Pocketinns and Mada offered and sold unregistered securities from New Jersey in the form of a cryptocurrency called “PINNS Tokens.”

Pocketinns and Mada, who have never been registered with the Bureau of Securities, offered and sold the unregistered PINNS Tokens through an Initial Token Offering (ITO) in exchange for the cryptocurrency Ethereum.

The State alleges that between January 15 and January 31, 2018, Pocketinns and Mada offered and sold approximately $410,000 of PINNS Tokens to 217 investors, in violation of New Jersey’s Uniform Securities Law. The State also alleges that Mada acted as an unregistered agent and Pocketinns employed an unregistered agent, in further violation of the law.

According to the complaint, filed in Superior Court in Bergen County on Wednesday, Pocketinns sought to raise up to $46 million though the sale of up to 30 million PINNS Tokens. The minimum required investment was one Ether, which currently has a value of approximately $280. However, at the time of the Pocketinns ITO, one Ether had a value of approximately $728.

Further, the Complaint says that the defendants represented the PINNS Tokens were sold pursuant to a federal registration exemption that requires all purchasers to be verified as accredited investors who met certain net worth or income thresholds. However, Pocketinns and Mada failed to take reasonable steps to ensure that the Pocketinns investors were accredited, thus causing the offering’s exemption to be inapplicable and requiring the PINNS Tokens to have been registered with the Bureau of Securities, the State alleges.

To qualify as an accredited investor, an individual must have a personal net worth in excess of $1 million or, together with a spouse, have a joint net worth in excess of $1 million. Alternatively, to be an accredited investor a person must have had an individual income in excess of $200,000 in each of the two most recent years preceding the investment or joint income with that person’s spouse in excess of $300,000 in each of those years and have a reasonable expectation of reaching the same income level in the current year.

Only 11 of the 217 investors who purchased the PINNS Tokens provided documentation to substantiate their accredited investor status, according to the State’s Complaint.

“By failing to take reasonable steps to verify that purchasers were accredited investors capable of bearing the increased risks associated with unregistered securities, the defendants violated the law and exposed investors to financial losses that could have been devastating,” said Paul Rodríguez, Acting Director of the Division of Consumer Affairs.

The State’s Complaint seeks to permanently enjoin Pocketinns and Mada from selling securities in New Jersey, assess civil monetary penalties against the defendants for each violation of the Securities Law, and require them to offer restitution and/or rescission to New Jersey investors and other investors who were sold securities from New Jersey.

A survey of state and provincial securities regulators by the North American Securities Administrators Association (NASAA), of which the Bureau of Securities is a member, shows 94% believe there is a “high risk of fraud” involving cryptocurrencies. Regulators also were unanimous in their view that more regulation is needed for cryptocurrency to provide greater investor protection.

Read this next

Financewire

Kinesis Mint becomes the official partner for the House of Mandela

Kinesis Mint, the certified independent precious metals mint and refinery of Kinesis, the monetary system backed by 1:1 allocated gold and silver, has been appointed the exclusive coin producer for the House of Mandela.

Chainwire

Kadena Announces Annelise Osborne as Chief Business Officer

Kadena, the only scalable Layer-1 Proof-of-Work blockchain, expands its leadership team by onboarding Annelise Osborne as Kadena’s new Chief Business Officer (CBO).

Fintech

TNS brings full-stack market data management to EMEA

“We are also delighted to have Ben Myers join our London-based TNS Financial Markets team as Head of Strategic Sales for EMEA, to bolster our presence in the region.”

Chainwire

Velocity Labs and Ramp Network facilitate fiat to crypto onramp on Polkadot via Asset Hub support

Velocity Labs is proud to announce a fiat to crypto onramp using Ramp Network through the integration of Asset Hub. Through it, Ramp will be able to service any parachain in the Polkadot ecosystem.

Executive Moves

INFINOX hires Mayne Ayliffe as Global Head of HR

“I look forward to working with our teams around the world to develop a strategic HR agenda that supports high performance and is centred on human motivation.”

Fintech

Sterling to provide risk and margin support for fixed income

“Firms must have the tools to effectively manage their risk across all asset classes. As yields rise, we see more exposure from clients in the fixed income space. We understand their need to measure and mitigate risk in a highly regulated environment.”

Retail FX

FXOpen launches HK share CFDs: Tencent, Alibaba, Xiaomi, Baidu

Hong Kong share CFDs will be commission-free for a limited period of time.

Retail FX

IronFX Celebrates an Award-Winning Start to 2024 with a Series of Industry Recognitions

IronFX, a global leader in online trading, has embarked on 2024 with a spectacular display of accolades that highlight its commitment to excellence and innovation in the competitive financial services sector.

Industry News

FIA urges CFTC to regulate use cases rather than AI itself

“We urge the CFTC to refrain from crafting new regulations that generally regulate AI because this approach presents certain well-known pitfalls. By approaching the issue from the perspective of AI as a technology, rather than the use case for the technology, corresponding regulations would likely necessitate a definition of AI. We anticipate that any attempt to properly define AI would be very challenging and require considerable resources.”

<