On May 20, 2019, Stephen Palley, a lawyer, published the United States District Court of Northern District of Georgia, Atlanta Division’s order containing allegations by plaintiffs that Clifford “T.I.” Joseph Harris, a famous American rapper, sold unregistered securities called FLiK tokens to them and failed to invest the raised funds into the project, resulting in a considerable devaluation of the token.
Court Claims FLiK ICO Tokens are Securities
According to Stephen Palley’s publication, the United States District Court of Northern District of Georgia, Atlanta Division in an order, claims that the FLiK tokens offered by T.I. during the asset’s initial coin offering (ICO) can be classified as securities under the Howey Test.
Now, investors in the defunct project claim that the promoters behind FLiK tokens are liable for their loss since the tokens can be categorized as unregistered securities.
Ryan Felton, a promoter of the digital asset had motioned for the claims to be dismissed despite the court has reviewed the class action had concluded.
The court first outlined that potential investors were given the impression that they could make a profit from FLiK tokens.
An instance of this is Felton’s advertisement on social media platforms on October 18, 2017, that FLiK tokens would be worth $3.99 in three months, $9.99 in 12 months and, $14.99 in 15 months.
Similarly, the profit that FLiK tokens could yield was tied to an Internet platform where the tokens were to be utilized. However, the platform was never launched by the defendants, which negatively impacted on the token’s price.
According to the court, if the platform had been launched, it would’ve helped to save the price per token.
Nonetheless, it was entirely up to the defendants to see to its establishment since the plaintiffs had no say on the turnout of events and the use of their funds was altogether dependent on the defendants, as disclosed in the Whitepaper.
The whitepaper stated that 50 percent of generated funds would be used for licensing content, 25 percent will be invested in unique studio projects, 15 percent for marketing and promoting the FLiCK platform, and 15 percent to promote additional viewing platforms.
On the contrary, the court noted that claims for an unregistered sale of securities have to be brought to the law within one year of the violation and as such, “because this isn’t pleaded, these claims are dismissed with leave to refile.”
BTCManager on May 16, 2019, also informed that a U.S. federal judge had dismissed the case against Floyd Mayweather and DJ Khaled brought by investors in the Centra Tech ICO.