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Elastos and Huobi Faces Lawsuit Filed by US Investors

It seems that the creators of Elatos (ELA) and the major crypto exchange Huobi are getting into trouble as investors of ELA ICO accused them of hosting unauthorized security sale.

The sue case has been filed with the New York Supreme Court which calls for the Elastos Foundation, Huobi and HBUS to respond to the claim. The lead plaintiff Mark Owen claimed that the defendants have violated Section 5 of the Securities Act 1933, which mandating all securities sales to register first with the SEC.

“The defendants brazenly disregarded these well-established U.S. securities laws by, inter alia, failing to register ELA securities with the SEC, No defendant in this action was registered with the SEC as a broker or dealer as required by law to legally sell securities in the United States,” the summons reads.

Elastos is a China-based project that claimed to build a “blockchain-powered world wide web”. In January 2018, Elastos launched its ICO and sold 2 million ELA tokens. According to the whitepaper, the ELA token is used for trading and exchanging value on the Elastos ecosystem.

Nevertheless, ELA investors were encouraged to participate in a three-year lockup period, after which they were guaranteed a 6% returns on their assets. The investment project has ended up being a scheme in October.

Rong Chen, founder of Elastos Foundation posted an official blog to informed the modification of the schedule of its token lock-up program due to the overseas regulatory regimes. According to the post,  locked tokens will be returned to long-term investors on November 5th, well in advance of the original date set for early next year. ELA coins will also be returned to angel investors on November 20th, and the 16 million ELA held by the Elastos Foundation will be turned over to the community-run Cyber Republic.

As the early-released locked-up tokens may potentially flooding the market, Over 100 Chinese investors signed an open letter to accuse the founders of frauds and manipulations.

In the crypto community, the trust of investors to Elastos has been broken up, the token has lost 95% of its value compares to its all-time high. As investors from mainland China were not allowed to participate in the ELA project due to the ICO ban launched in September 2017, most ELA holders that suffered great losses were US citizens.

Although the filing has not been signed by the country cleck’s office, Elastos founder Rong Cheng has confirmed that they have received the summons and ‘would be contesting the allegations”,  according to Cryptobriefing.

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