The state of New Jersey has filed a three count lawsuit against Pocketinns and its president Sarvajnya G. Mada today.
Pocketinns is a blockchain-driven online rental marketplace based in Princeton, NJ.
It is alleged by the lawsuit that Pocketinns and its president Sarvajnya Mada offered and sold more than $400,000 of unregistered securities from New Jersey in the form of a cryptocurrency called “PINNS Tokens.”
And, according to the lawsuit Pocketinns and Mada offered and sold the unregistered PINNS Tokens through an Initial Token Offering (“ITO”) in exchange for the cryptocurrency Ethereum (“Ether.”) with out registering with New Jersey Bureau of Securities in any capacity.
Further, Pocketinns and Mada allegedly offered and sold approximately $410,000 of PINNS Tokens to 217 investors, in violation of New Jersey’s Uniform Securities Law.
Also, Sarvajnya Mada acted as an unregistered agent and Pocketinns employed an unregistered agent, in further violation of New Jersey’s Uniform Securities Law.
According to the complaint:
..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. “We’re reminding investors to be extra vigilant about fully vetting what is being sold, especially before investing with cryptocurrency.”
Cryptocurrencies are a medium of exchange that are created and stored electronically in the blockchain, a distributed public database that keeps a permanent record of digital transactions. Current common cryptocurrencies include Bitcoin, Ethereum and Litecoin.
Unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets. They are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities, and are subject to little or no regulation.
Filed in Superior Court of New Jersey Chancery Division, the lawsuit seeks to to permanently enjoin:
- Pocketinns and Mada from selling securities in New Jersey
- Assess civil monetary penalties against Pocketinns and Sarvajnya Mada for each violation of the Securities Law
- Require Pocketinns and Sarvajnya Mada to offer restitution and/or rescission to New Jersey investors and other investors who were sold securities from New Jersey.
Besides Sarvajnya G. Mada, the other executives of Princeton, NJ based Pocketinns include Amol Sharma (Chief Technical Architect) of Newark, CA and Smita Mudya (Executive Officer) of North Brunswick, NJ.