The Securities and Exchange Commission today announced charges against Virginia-based Boon.Tech and its chief executive officer Rajesh Pavithran for fraud and registration violations in connection with a $5 million initial coin offering (ICO) of digital asset securities. 

According to the SEC’s order, from November 2017 to January 2018, Boon.Tech and Pavithran raised approximately $5 million by selling Boon Coins to more than 1,500 investors in the U.S. and worldwide to raise funding to develop and market a platform to connect employers posting jobs with freelancers seeking work.  The order finds that the Boon Coins were offered and sold as investment contracts and were therefore securities, and that Boon.Tech and Pavithran failed to register the offering.  Further, the order finds that Pavithran and Boon.Tech made false and misleading statements, including claims that Boon Coins were stable and secure because Boon.Tech’s platform eliminated volatility inherent in the digital asset markets by using patent-pending technology to hedge Boon Coins against the U.S. dollar, when in fact Boon.Tech had no such patent-pending technology.  The order also finds that Boon.Tech and Pavithran misrepresented to investors that Boon.Tech’s platform was faster and more scalable than its competitors because it was built on Boon.Tech’s own blockchain, when in reality the platform was being developed on the same public blockchain as its competitors.

“Investors are entitled to truthful disclosures from issuers of securities, whether digital or otherwise,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit.  “Pavithran and Boon.Tech defrauded investors by convincing them to fund this endeavor based on the allure of innovation that simply did not exist.”

The SEC’s order finds that Boon.Tech and Pavithran violated the antifraud and registration provisions of the federal securities laws.  Without admitting or denying the SEC’s findings, Boon.Tech and Pavithran agreed to settle the charges by consenting to the issuance of the order, which requires Boon.Tech to disgorge the $5 million raised in the ICO plus prejudgment interest of $600,334.  The order further requires Boon.Tech and Pavithran to destroy all Boon Coins in their possession, issue requests to remove Boon Coins from any further trading on all third-party digital asset trading platforms, and refrain from participating in any future offerings of digital asset securities.  Further, the order requires Pavithran to pay a penalty of $150,000 and bars him from serving as an officer or director of a public company.

The SEC’s investigation was conducted by Alice Liu Jensen of the Enforcement Division’s Market Abuse Unit and Mika Donlon and Danielle Srour of the Enforcement Division’s Retail Strategy Task Force, and supervised by Steven Buchholz and Ms. Littman of the Cyber Unit, Joseph Sansone of the Market Abuse Unit, and Charu Chandrasekhar of the Retail Strategy Task Force. 

The SEC’s Office of Investor Education and Advocacy and the Enforcement Division’s Retail Strategy Task Force encourage investors who are considering investing in ICOs and digital assets to learn more on Investor.gov’s Spotlight on Initial Coin Offerings and Digital Assets.