ParagonCoin Inc., headquartered in Hollywood, settled an Initial Coin Offering (ICO) dispute with the Securities and Exchange Commission Dec. 13, agreeing to pay a fine of $250,000 and provide investors with the opportunity to recoup their lost funds.

The company raised an approximately $12 million ICO for its cryptocurrency, ParagonCoin. In a white paper, a Paragon principal told investors the ICO proceeds would be used to “build an entire ecosystem around our token that we’re expecting to bring much more value to the token than what[sic] it’s offered at right now,” according to an SEC filing issued Nov. 16.

ParagonCoin used the ICO funds to purchase real estate on Hollywood’s Tamarind Avenue, with plans to create a “cannabis coworking space” for local pot businesses, where tenants would pay rent using its proprietary coins instead of cash. ParagonCoin did not adhere to previously promised schedules for releasing the coins designed to stabilize their market price, nor did it register as a publicly traded company due to its high volume of investors. With over 8,000 investors listed participating in its ICO, ParagonCoin surpassed the established 5,000 investor limit for private companies but failed to register as a public firm. Therefore, the tokens were sold in violation of the Federal Securities Act.

Now, the SEC says investors had “reasonable expectations of obtaining a future profit,” which were not met. Investors now have the opportunity to sue ParagonCoin for the recovery of their investments, plus interest. If the investors have sold securities between the time of purchase and the settlement, they are eligible to sue for damages or file a claim form on ParagonCoin’s website, the filing notes.

ParagonCoin declined to comment at press time.

Tech reporter Samson Amore can be reached at [email protected] or (323) 556-8335. Follow him on Twitter @samsonamore.