Investors in the Giga Watt ICO have taken aim at the cryptocurrency mining startup, filing a class-action lawsuit against the company in the state of Washington. Plaintiffs allege that they invested in tokens, which have yet to be supplied, that have all the makings of a security, yet the company didn't register the digital coins with securities regulators. It's the latest in a string of similar complaints in which investors claim securities fraud after being left disappointed with the results.
According to the complaint, which was filed by Louisiana LLC StormsMedia on behalf of others, investors poured more than USD 20 million into the Giga Watt ICO over the summer months across ETH, BTC and fiat money. That amount has since ballooned to USD 100 million as a function of the rise in cryptocurrency prices.
Giga Watt is a Washington-based cryptocurrency mining operation, and developers allegedly promised that the WTT tokens tied to the project would skyrocket in value. The project launch is tied to the distribution of the tokens, and a delay in the development of the mining operation has led to a subsequent delay in the distribution of the tokens that were promised in the Giga Watt ICO. The plaintiffs allege that it's unclear if the mining project remains in development and if it will ever be fully developed at all.
The proceeds raised from the Giga Watt ICO are allegedly out of escrow and in a Giga Watt account, and plaintiffs argue that they may never see their WTT tokens or any return on investment. The plaintiffs further allege that the defendants were "profit seeking investors" who performed an "unregistered offering of securities."
Rescinding Their Investment in the ICO
Plaintiffs are seeking "compensatory and equitable relief rescinding their investments in Giga Watt" and the restoration of "assets and funds they were induced into investing."
Giga Watt explains in a blog post that the project was delayed, outlining the reasons, mostly inspection-related. They also address the delay in the token distribution, tying it to the delay in project development. The risks inherent with a project that has yet to be developed have been documented, and the SEC has made it clear that it's the responsibility of investors to do their homework.
Clearly there is a trend unfolding in which ICO participants are holding issuers accountable. It's unclear how the courts will decide to rule in these cases, but 2018 should provide some clarity on that front.
Giga Watt does not appear to have responded publicly to the complaint lodged against it.