SEC charges Herndon-based tech company, CEO with fraud
SEC orders Boon.Tech to relinquish $5M raised through unregistered coin offering
The Securities and Exchange Commission announced charges Thursday against Herndon-based Kelvin Boon LLC/Boon.Tech and its CEO, Rajesh Pavithran, for fraud and registration violations in connection with a $5 million initial coin offering of digital asset securities.
Without admitting or denying the SEC’s findings, Pavithran and his company agreed to settle the charges by consenting to the issuance of the SEC order, which requires Boon.Tech to disgorge the $5 million raised in the ICO plus prejudgment interest of $600,334.
Between November 2017 and January 2018, Boon.Tech and Pavithran raised approximately $5 million by selling Boon Coins to more than 1,500 investors in the U.S. and worldwide, according to the SEC’s order. The ICO was intended to raise funding to develop and market a platform to connect employers posting jobs with freelancers seeking work.
The SEC found that the coins were offered and sold as investment contracts and were therefore securities, and that Boon.Tech and Pavithran did not register the ICO as required. Further, the SEC alleges that Pavithran and Boon.Tech made false and misleading statements, including claims that Boon Coins were stable and secure because Boon.Tech’s platform eliminated volatility inherent in the digital asset markets by using patent-pending technology to hedge Boon Coins against the U.S. dollar, when in fact Boon.Tech had no such technology or a patent pending.
Boon.Tech and Pavithran also misrepresented to investors that Boon.Tech’s platform was faster and more scalable than competitors because it was built on Boon.Tech’s own blockchain, according to the SEC, when in actuality the platform was being developed on the same public blockchain as its competitors.
“Investors are entitled to truthful disclosures from issuers of securities, whether digital or otherwise,” said Kristina Littman, chief of the SEC Enforcement Division’s cyber unit. “Pavithran and Boon.Tech defrauded investors by convincing them to fund this endeavor based on the allure of innovation that simply did not exist.”
The SEC’s order finds that Boon.Tech and Pavithran violated the antifraud and registration provisions of the federal securities laws. The order also requires Boon.Tech and Pavithran to destroy all Boon Coins in their possession, issue requests to remove Boon Coins from any further trading on all third-party digital asset trading platforms and refrain from participating in any future offerings of digital asset securities. Further, the order requires Pavithran to pay a penalty of $150,000 and bars him from serving as an officer or director of a public company.