In the Matter of Paragon Coin, Inc.
Admin. Proc. File No. 3-18897
On November 16, 2018, the Commission instituted and simultaneously settled cease-and-desist proceedings (the “Order”) against Paragon Coin, Inc. (“Paragon” or the “Respondent”). In the Order, the Commission found that between August 2017 and October 2017, Paragon offered and sold digital tokens to be issued on a blockchain, or a distribution ledger (the “offering”) to raise capital to develop and implement its business plan to add blockchain technology to the cannabis industry and work towards legalization of cannabis. Paragon raised approximately $12 million worth of digital assets during the offering.
In the Order, among other things, the Respondent undertook to register the PRG tokens as a class of securities; to distribute a notice and claim form notifying all eligible purchasers of their potential claims under Section 12(a) of the Securities Act, including their right to sue “to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if [the purchaser] no longer owns the security” and informing purchasers that they may submit a written claim directly to Respondent and that such claims must be submitted within three (3) months from the claim form deadline.
In anticipation of the Respondent’s compliance with the undertakings set forth in the Order, it was determined no further funds would be needed to fully compensate the harmed investors. Therefore, the $250,000 civil money penalty that the Commission imposed was ordered to be paid to the Commission for transfer to the general fund of the U.S. Treasury (“Treasury”), pursuant to the payment plan detailed therein. See the Commission’s Order: Release No. 33-10574.
The Respondent defaulted on its obligation to perform a respondent-administered claims process under the terms of the Order, and as of April 8, 2021, $175,000 of the civil money penalty had been paid and sent to the Treasury in accordance with the Order.
The Commission staff has determined that it is feasible to distribute the civil money penalty funds paid to date to compensate investors harmed by Respondent’s conduct described in the Order. Therefore, the Commission staff has taken the appropriate steps to recall from Treasury the $175,000 paid by Respondent.
On April 8, 2021, the Commission issued an order establishing a Fair Fund (the “Fair Fund”), pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, so the penalty paid to date, along with any future funds paid by the Respondent, can be distributed to harmed investors. See the Commission’s Order: Release No. 34-91522.
The Commission currently holds the Fair Fund in an interest-bearing account at the U.S. Department of Treasury’s Bureau of the Fiscal Service, and any interest accrued will be for the benefit of the Fair Fund.
On June 28, 2021, the Commission issued an order appointing Miller Kaplan Arase LLP, as the Tax Administrator of the Fair Fund. See the Commission’s Order: Release No. 34-92276.
On October 3, 2022, the Commission published a notice of the proposed plan of distribution and opportunity for comment and simultaneously published the proposed plan of distribution (“Proposed Plan”). The Proposed Plan proposes Keshia Ellis, a Commission employee, serve as the Fund Administrator to oversee the administration and distribution of the Fair Fund. The notice provides the public with 30 days to submit their comments on the Proposed Plan. See the Commission’s Notice: Release No. 34-95965 and the Proposed Plan.
The Proposed Plan provides that the distribution of the Fair Fund shall be made to those investors who purchased or acquired “PRG Tokens,” a digital token issued by Paragon Coin, Inc. between August 2017 and October 2017, and suffered a recognized loss as calculated by the methodology used in the plan of allocation in the Plan.
On December 1, 2022, the Commission issued an order approving the Proposed Plan and simultaneously posted the approved plan of distribution (the “Plan”). See the Commission’s Order: Release No. 34-96428 and the Plan.
For more information, please contact the Commission:
Office of Distributions