On August 13, 2020, the US SEC announced that it was suing Boon.Tech, a Virginia-based company, and the CEO Rajesh Pavithran for violation of federal securities law and fraud. According to the Sec, the reason for this legal action is a fraudulent $5 million ICO during which 1500 investors were sold Boon Coins.
The False Promises Made
Pavithran and Boon.Tech promised investors that in exchange for the investment, they would develop and market a platform where freelancers and employers could connect. According to the SEC, the offenses took place between November 2017 and January 2018. The SEC’s announcement states that Pavithran and Boon.Tech failed to register the Boon Coins as securities, even though they fit the description of a security.
The SEC is also accusing the CEO and his company of making false statements that misled investors. For instance, the SEC says Boon.Tech told investors that the Boon Coins were secure and stable. The CEO and Boon.Tech claimed that they were using patent-pending technology to stabilize the price of the Boon Coins against the USD. However, Pavithran and Boon.Tech did not have any such technology.
Another false claim by Boon.Tech was that the platform would be faster and more scalable since it was built on Boon.Tech’s blockchain. However, the SEC found that the blockchain used on the platform was the same as that used by its competitors.
The Consequences for Boon.Tech and Pavithran
Commenting on the issue, the Chief of Cyber Unit of the Enforcement Division at the SEC, Kristina Littman noted that investors had a right to access truthful information from those selling securities. Littman added that Boon.Tech and Pavithran stole from investors by lying to them about an innovation that did not exist. Boon.Tech and Pavithran are accused of violating federal securities laws regarding registration of securities as well as federal anti-fraud laws.
They Agreed to Settle
The announcement by the SEC revealed that Pavithran and Boon.Tech had agreed to settle. They will have to hand over the $5 million they raised from investors as well as $600,334 in prejudgment interest. Pavithran will also have to pay a $150,000 penalty and he can never serve as a director or officer in a public company.
As part of the settlement agreement, the CEO and his company will destroy all the Boon Coins they possess and issue requests for any third-party trading platform to stop supporting them.