After failing to convince a federal court regarding the nature of Blockvest tokens in the previous hearing, the U.S. Securities and Exchange Commission (SEC) has finally convinced the same judge that these tokens are securities. The agency alleges that the firm and its founder made several false claims regarding their token’s regulatory status.
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SEC’s Motion Finally Granted
The SEC announced on Thursday that the U.S. District Court for the Southern District of California has reconsidered its prior order regarding the Blockvest token. The court subsequently granted the agency a “preliminary injunction against Blockvest Llc and its founder Reginald Buddy Ringgold III aka Rasool Abdul Rahim El for making fraudulent offers of securities.”
The order was signed by Judge Gonzalo P. Curiel who previously denied the Commission’s request for a preliminary injunction against the defendants, citing “disputed factual issues as to the nature of the investment being offered to the alleged investors.”
Howey Test Now Satisfied
Howey’s three-part test needs to be satisfied in order to prove that a token is a security. It requires “(1) an investment of money (2) in a common enterprise (3) with an expectation of profits produced by the efforts of others,” the court document describes. While the SEC previously failed to show the court that Blockvest tokens (BLV) satisfied these requirements, the order issued on Thursday reveals:
The court determines that the SEC has demonstrated that the promotion of the ICO of the BLV token was a ‘security’ and satisfies the Howey test.
The judge ruled that the “defendants’ website and their whitepaper’s invitation to potential investors to provide digital currency in return for BLV tokens satisfies the first ‘investment of money’ prong.”
For the second prong of the Howey test, the court decided that the defendants’ “website promoted a ‘common enterprise’” since the company claimed that the funds raised will be pooled with a profit-sharing plan. Specifically, its whitepaper states that as “a Blockvest token holder, your Blockvest will generate a pro-rated share of 50% of the profit generated quarterly as well as fees for processing transactions.”
Finally, the defendants’ website and whitepaper explain that Blockvest investors would be “passive” investors and the BLV tokens would generate “passive income,” the case papers reveal, noting:
The contents of defendants’ website, the whitepaper and social media posts concerning the ICO of the BLV tokens to the public at large constitute an ‘offer’ of ‘securities’ under the Securities Act.
The Case and the New Ruling
The SEC filed a complaint on Oct. 3 last year alleging that the defendants raised funds through an ICO for several financial products “based on misrepresentations about the firm’s regulatory status.”
The Commission elaborated that the defendants falsely claimed that their ICO had been registered and approved by three regulators: the SEC, the Commodity Futures Trading Commission, and the National Futures Association. The defendants also falsely claimed that they had partnered with and been audited by Deloitte, the agency alleges, noting that they also created a fictitious regulatory agency called the Blockchain Exchange Commission with the same address as the SEC’s headquarters.
“The court ruled that [the] defendants are enjoined from violating provisions of the federal securities law prohibiting fraudulent offers or sales of securities,” the SEC confirmed Thursday. Specifically, the defendants made an offer of unregistered securities, which violated the Securities Act of 1933.
What do you think of the SEC taking action against Blockvest and its founder? Let us know in the comments section below.
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The post Court Reconsiders Ruling After SEC Proves Tokens Are Securities appeared first on Bitcoin News.