Investors file lawsuit against Huobi and Elastos for running unregistered ICO

13 Feb, 2019 | Updated: 13 Feb, 2019
by Richard Allen
Exchange
Investors file lawsuit against Huobi and Elastos for running unregistered ICO

The creators of Elastos (ELA) and cryptocurrency exchange Huobi are now facing legal action after investors have accused the two of hosting an unauthorized securities sale, CryptoBriefing reports.

Leaked subpoena documents have revealed that the investors have gone to the New York Supreme Court to summon the Elastos Foundation and its employees as well as Huobi and its US partner HBUS. A class-action lawsuit led by plaintiff Mark Owen claims that the Elastos ICO, which took place last year, was in violation of Section 5 of the Securities Act 1933, which states that all sales must first register with the SEC.

The filing alleges that ELA tokens were sold on the premise that they were an investment that would increase in value as Elastos developed the system and demand for the coin grew. The document goes on to say that neither Elastos nor Huobi registered the ICO with the SEC and, as such, was an unregistered US securities sale.

Read more: Huobi eyes US expansion with launch of US dollar gateway for global traders

The token’s whitepaper describes ELA as utility tokens to be used for trading and exchanging as well as to pay for network fees. Holders were encouraged to participate in the three-year lockup period which would see them earn 6% on their initial investment. The project, however, announced it was ending the scheme in October.

The defendants brazenly disregarded these well-established U.S. securities laws by, inter alia, failing to register ELA securities with the SEC,” the summons reads. “No defendant in this action was registered with the SEC as a broker or dealer as required by law to legally sell securities in the United States.”

Since the filing was recieved on January 31, it hasn't yet been signed off by the county clerk's office. Thus, at the time of writing, it isn't a formal hearing.

Read more: Huobi recorded $483M trading commission in 2018, exceeding Binance and OKEx

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