Investors allege DFINITY Foundation sold unregistered securities

The nonprofit DFINITY Foundation, behind the development of the Internet Computer ecosystem, has faced a class-action lawsuit from investors accusing it of selling unregistered securities disguised as ICP tokens.

California resident Daniel Ocampo filed the complaint “on behalf of all investors who purchased Internet Computer tokens on May 10, 2021 or thereafter”.

DFINITY founder Dominic Williams, venture firm Polychain Capital and hedge fund Andreessen Horowitz (a16z) are also named as defendants in the filing. The latter two entities were early investors in the project.

ICP trading began in early May. After the Mercury genesis block of the network was launched, the native token appeared on exchange listings Coinbase Pro, Binance, FTX, Huobi and OKEx. On its first day of trading it entered the top-7 by market capitalization.

Ocampo alleges that more than 469,213,710 ICP tokens issued under this process were literally “created out of thin air” and sold in violation of Закона о ценных бумаг 1933 года.

According to the lead plaintiff, investors were sold tokens on the premise that they were investing in a joint venture and could expect future profits dependent on the success of Internet Computer.

The filing also states that 24% of the current ICP supply was allocated to the defendants, with the lion’s share of these assets distributed between Polychain Capital and a16z.

After the Genesis block launch, ICP traded around $475, but over the course of the month its price fell by 90%, according to CoinGecko. At the time of writing the asset price was $34.9.

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In late June Arkham Intelligence analysts released a report in which they described such a price plunge as highly unusual for a project with such large investments.

Analysts also found that around $2 billion worth of ICP tokens were moved to cryptocurrency exchanges by “likely insider addresses.” Those transactions coincided with a noticeable price drop.

On May 25, 2021, the DFINITY Foundation launched a program to fund the development of the Internet Computer ecosystem. Grants to developers totaled more than $223 million.

CA Sup Mto 21-Civ-03843 Complaint by ForkLog on Scribd

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