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John Hastings, a resident of Las Vegas and one of the investors of Unikrn, a Seattle-based esports gambling startup, has sued the company for violations in securities law in connection with the sale of its cryptocurrency, UnikoinGold. The start-up has the backing of some big names like Ashton Kutcher and Dallas Mavericks owner Mark Cuban.

Unikrn launched its cryptocurrency UnikoinGold, based on the Ethereum blockchain network, last September.  It is marketed as the chosen currency to be used on the Unikrn gambling platform, which allows users to bet on esports titles such as League of Legends, Dota 2, Counter-Strike: Global Offensive and more. During that September offering, Las Vegas resident John Hastings purchased UnikoinGold tokens with 10 Ethereum, worth approximately $2800 at that time.

Hastings filed suit Monday in King County, Washington, against Unikrn, a Bermuda-registered subsidiary of the company and its founders, former Microsoft Ventures general manager Rahul Sood and Karl Flores. In the suit, Hastings is seeking class-action status for all purchases of UnikoinGold. In a statement to GeekWire, Sood acknowledged the lawsuit and said Unikrn has retained Seattle-based law firm Perkins Coie to “vigorously defend” the company.

Hastings argues that statements made by Sood and other Unikrn staff contradict the assertion that UnikoinGold was intended to be used as a method to participate in the Unikrn gambling platform. Hastings alleges that the continuous offering of these tokens to the public, the alleged intent for purchasers to resell them at a later date and a private presale to accredited investors before the coin was offered to the public constitute an investment and that the company thus violated Securities and Exchange Commission regulations.

“Defendants have crafted a flimsy facade that UKG Tokens are not securities by claiming they are utility tokens,” Hastings alleges in the complaint filing, which was obtained by ESPN. “In reality, the UnikoinGold ICO was an offer and sale of securities. Indeed, it is evident that investors were purchasing UKG Tokens with the expectation that those tokens would increase in value and become worth more than the virtual currencies invested.”

In the suit, Hastings also cites an SEC investigative report released in July that states the cryptocurrency DAO Tokens were subject to federal security laws. Hastings argues that the case made by the SEC in the ruling against DAO applies to Unikrn and UnikoinGold.

At the time of the September initial coin offering, Unikrn Bermuda Ltd. filed a notice of exempt offering of securities with the SEC, stating that it offered $20 million and as of Sept. 19 had sold $16.02 million of those shares. UnikoinGold was first listed at 30 cents per token when the initial coin offering launched in September; it now rests at just under a nickel.

In October, Unikrn announced it had raised 112,720 Ethereum, worth approximately $31 million at that time, in a two-phase UnikoinGold initial coin offering that spanned 112 countries. Among the participating buyers in the first phase, an exclusive presale, were Cuban and Ethereum co-founder Anthony Diiorio.

Unikrn launched in November 2014 as one of the first regulated esports gambling sites. In June 2015, Unikrn raised $10 million from Cuban, Kutcher, Binary Capital and a number of high-profile investors. In May, Cuban told ESPN that Unikrn would “benefit significantly” from the U.S. Supreme Court’s decision to allow states to legalise sports gambling.

Unikrn has continued to expand its presence across the world. In December, it signed a partnership deal with MGM Resorts International to run esports tournaments in Las Vegas. It also is a shareholder in Berlin International Gaming, a professional esports team with a large foothold in Counter-Strike: Global Offensive.

Source: espn.com

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