Dfinity Faces Class Action Lawsuit Claiming ICP Token Is An Unregistered Security

Dfinity was hit by a class action lawsuit in California, alleging that the company sold its native Internet Computer Project (ICP) tokens as unregistered security.

complaint was filed by California resident Daniel Ocampo “on behalf of all investors who purchased Internet Computer Project tokens as of May 10, 2021.”

lawsuit targets crypto hedge fund Olaf Carlson-Wee Polychain Capital, venture capital firm Andreessen Horowitz and Dfinity founder Dominic Williams as “controlling defendants.” Polychain and Andreessen Horowitz were the first supporters of the project.

decipher contacted all three parties for comment.

Dfinity is a blockchain smart contract platform that hopes to compete with the $ 370 billion cloud computing industry by bringing decentralized versions of killer apps like Whatsapp, Linkedin, and Uber. Its ICP token would be used as a governance tool, to pay transaction fees within the network, as well as a reward for users who interact with the platform.

After a successful Genesis launch in May, ICP went public on Coinbase Pro. Since then, its price has been extremely volatile.

Recently, crypto intelligence firm Arkham Intelligence published a report on Dfinity’s native token after analysts noted that the token’s 90% price drop in its first month was highly unusual for a project with a venture capital investment. so big and technological ambitions.

Arkham identified approximately $ 2 billion in ICP tokens transferred to cryptocurrency exchanges from “probable internal addresses” after the Genesis launch and said these transfers coincided with significant price drops.

lawsuit claims that the 469,213,710 ICP tokens that were made available at the ICP Genesis launch event were “created out of thin air” and sold in violation of the Securities Act of 1933.

lawsuit also claims that 24% of the current supply of ICP tokens has been turned over to the ‘defendant controllers’, with Polychain and Andreessen Horowitz obtaining the majority of them.

ICP tokens were allegedly sold to investors in the belief that they were investing in a joint venture and could expect future earnings from the future success of the Dfinity Internet Computer Project.

Taken together, the report and the class action conclude that Dfinity has not been transparent about the allocation of its ICP tokens, leaving longtime supporters and small investors out of the loop, while a circle of insiders made huge profits from the token sale.

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