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Press Release

​​​​​​​​​​​​​​For Immediate Release:
July 18, 2019

Office of The Attorney General
Gurbir S. Grewal, Attorney General

Division of Consumer Affairs
Paul R. Rodríguez, Acting Director

Bureau of Securities
Christopher W. Gerold, Bureau Chief

Division of Law
Michelle Miller, Director
​​​​ For Further Information Contact:
Lisa Coryell 609-292-4791

AG Grewal, NJ Bureau of Securities Announce Cryptocurrency Lawsuit Against Princeton-Based Business for Allegedly Violating Securities Law in Sale of Tokens


NEWARK - Attorney General Gurbir S. Grewal and the New Jersey Bureau of Securities within the Division of Consumer Affairs announced today that the State has filed a three-count lawsuit against Pocketinns, Inc., a Princeton-based blockchain-driven online rental marketplace, and its president Sarvajnya G. Mada. The lawsuit alleges that Pocketinns and Mada offered and sold more than $400,000 of unregistered securities from New Jersey in the form of a cryptocurrency called “PINNS Tokens.” 

Pocketinns and Mada, who have never been registered with the Bureau of Securities in any capacity, offered and sold the unregistered PINNS Tokens through an Initial Token Offering (“ITO”) in exchange for the cryptocurrency Ethereum (“Ether.”)

The State alleges that between January 15 and January 31, 2018, Pocketinns and Mada offered and sold approximately $410,000 of PINNS Tokens to 217 investors, in violation of New Jersey’s Uniform Securities Law. The State also alleges that Mada acted as an unregistered agent and Pocketinns employed an unregistered agent, in further violation of the law.

“Our securities laws apply to anyone offering or selling securities in this state, regardless of whether those securities are purchased with U.S. dollars or virtual currencies, and regardless of whether they are distributed in certificated form or through blockchain technology,” said Attorney General Grewal. “The lawsuit we filed makes it clear that individuals selling cryptocurrency-related investment products in New Jersey must comply with the law or face serious consequences.”

Filed in Superior Court in Bergen County yesterday, the State’s Complaint alleges Pocketinns sought to raise up to $46 million though the sale of up to 30 million PINNS Tokens.  The minimum required investment was one Ether, which currently has a value of approximately $280.  However, at the time of the Pocketinns ITO, one Ether had a value of approximately $728.

On its website and in a private placement memorandum referred to as the “Pocketinns Whitepaper,” Pocketinns claimed the investor funds would be used for Pocketinns’ business, specifically: development and engineering, research, resources, legal and compliance, sales and marketing, communications and media, infrastructure, and finance and acquisitions.

The Pocketinns Whitepaper further stated that the PINNS Tokens could be used for various transactions through the Pocketinns ecosystem that was still under construction.  It also acknowledged that some PINNS Token purchasers might seek to speculate on the PINNS Tokens for investment purposes.

According to the Complaint, the defendants represented the PINNS Tokens were sold pursuant to a federal registration exemption that requires all purchasers to be verified as accredited investors who met certain net worth or income thresholds. However, Pocketinns and Mada failed to take reasonable steps to ensure that the Pocketinns investors were accredited, thus causing the offering’s exemption to be inapplicable and requiring the PINNS Tokens to have been registered with the Bureau of Securities, the State alleges.

To qualify as an accredited investor, an individual must have a personal net worth in excess of $1 million or, together with a spouse, have a joint net worth in excess of $1 million.  Alternatively, to be an accredited investor a person must have had an individual income in excess of $200,000 in each of the two most recent years preceding the investment or joint income with that person's spouse in excess of $300,000 in each of those years and have a reasonable expectation of reaching the same income level in the current year.

Only 11 of the 217 investors who purchased the PINNS Tokens provided documentation to substantiate their accredited investor status, according to the State’s Complaint.

“By failing to take reasonable steps to verify that purchasers were accredited investors capable of bearing the increased risks associated with unregistered securities, the defendants violated the law and exposed investors to financial losses that could have been devastating,” said Paul Rodríguez, Acting Director of the Division of Consumer Affairs. “We’re reminding investors to be extra vigilant about fully vetting what is being sold, especially before investing with cryptocurrency.”

Cryptocurrencies are a medium of exchange that are created and stored electronically in the blockchain, a distributed public database that keeps a permanent record of digital transactions. Current common cryptocurrencies include Bitcoin, Ethereum and Litecoin.

Unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets. They are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities, and are subject to little or no regulation.

A survey of state and provincial securities regulators by the North American Securities Administrators Association (NASAA), of which the Bureau of Securities is a member, shows 94 percent believe there is a “high risk of fraud” involving cryptocurrencies. Regulators also were unanimous in their view that more regulation is needed for cryptocurrency to provide greater investor protection.

“Investment transactions involving cryptocurrency are often complicated and confusing with an unproven track record,” said Bureau Chief Christopher W. Gerold. “In order to protect New Jersey investors, we will continue to keep a close watch on this rapidly evolving market to ensure compliance with our securities law.”

The State’s Complaint seeks to permanently enjoin Pocketinns and Mada from selling securities in New Jersey, assess civil monetary penalties against the defendants for each violation of the Securities Law, and require them to offer restitution and/or rescission to New Jersey investors and other investors who were sold securities from New Jersey.

The Bureau’s investigation was handled by Deputy Chief Amy Kopleton and Director of Special Investigations Peter Cole of the Bureau of Securities, within the Division of Consumer Affairs.

Section Chief/Deputy Attorney General Victoria Manning and Assistant Section Chief/Deputy Attorney General Evan A. Showell of the Securities Fraud Prosecution Section in the Division of Law are representing the Bureau of Securities in this matter.

The Bureau is charged with protecting investors from investment fraud and regulating the securities industry in New Jersey. It is critical that investors “Check Before You Invest.” Investors can obtain information, including the registration status and disciplinary history, of any financial professional doing business to or from New Jersey, by contacting the Bureau toll-free within New Jersey at 1-866-I-Invest (1-866-446-8378) or from outside New Jersey at (973) 504-3600, or by visiting the Bureau’s website at www.NJSecurities.gov. Investors can also contact the Bureau for assistance, or to raise issues or complaints about New Jersey-based financial professionals or investments.

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Last Modified: 7/19/2019 6:40 AM