A Las Vegas man is suing Unikrn, claiming the company failed to register the tokens as securities during its ongoing ICO.

John Hastings claims that he and possibly many others lost money in the ICO for eSports startup Unikrn. The Las Vegas man is hoping to have his case against the company certified as a class action suit, and he’s hoping to get reimbursed for the 10 Ether he invested in Unikoins.

According to the complaint filed in King County Superior Court in Seattle, Unikrn attempted to raise over $86 million worth of Ether during an ICO that ran from September to October 2017. Unikrn offered what they characterized as a “utility token.” According to the plaintiff, the tokens had no functionality at the time of the ICO, and were instead, despite Unikrn’s characterization, securities.

The complaint argues that members of the Unikrn team discussed the coin in terms that made it sound very much like a security – broadcasting, for instance, that the coin was being purchased by knowledgeable investors such as Mark Cuban.

The company, according to the complaint, had effectively admitted the token was a security by filing what’s call a Form D Notice, an SEC document asserting that the product being offered is a security but is exempt from normal registration requirements. However, this form was only filed in regards to the presale, when the token was offered to accredited investors; no such form was filed in relation to the ICO, when retail investors, including Hastings, bought the coin.

While the complaint alleges that these “utility tokens” have no actual utility, that issue is not what the lawsuit is about. The complaint never asserts that Hastings was duped, that he lost money because he thought he was buying one thing but instead received something else. The complaint even specifically states the plaintiff is not accusing Unikrn of fraud.

Instead it’s about the loss of value of these tokens, whose price has declined on exchanges from $2.35 to $0.05: Had the tokens been registered as securities, investors would have benefited from “the substantive and procedural investor protection requirements of our securities laws.”

The complaint gives the impression everyone, both the Unikrn and the investors, thought these things were securities. Then, when the value tanked, some investors looked for a way to recoup their funds. Though such attempts are usually futile, in this case someone found a ray of light – Unikrn didn’t do its paperwork. 

Unikrn has called the suit “meritless,” but ultimately it may be up to a jury to decide if Unikrn is on the hook for the money