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A federal court in California, which in November 2018, denied the Securities and Exchange Commission a preliminary injunction against defendants accused of delivering a fraudulent and illegal offer and selling securities under the US Securities and Exchange Commission. A new inverted cryptobadet procedure, granted the preliminary injunction last week. The defendants in this case are Blockvest, LLC and its President and Founder, Reginald Buddy Ringgold, III / Rasool Abdul Rahim El.
The court found that the defendants' promotion of BLV tokens on Blockvest's website constituted an illegal offer of unregistered securities. The court based its decision on the application of the three-fold indexes of an investment contract – a type of security – set out by the US Supreme Court in its 1946 decision SEC v. WJ Howey(1) an investment of funds, (2) in a joint venture, (3) with a profit expectation based solely on the management or business efforts of others. (Click here to access the Howey decision.)
The court found that the use by defendants of a website to solicit people to provide digital currency for BLV tokens satisfied the investment in money from Howey, while the website indicates that the funds raised will be pooled and that the benefits will be shared. HoweyThe joint venture and profit expectations. The court rejected the defendants' argument that an offer requires a "demonstration of [an] intention to be bound, "baderting that this standard could be relevant for the evaluation of an offer under contract law, but that it was too narrow in relation to the law. enforcement of securities laws.
Previously, the court refused to conclude that the SEC had made a At first glance past infringements of securities law, as there were disputed facts regarding what had been promised to actual BLV buyers. However, in reviewing the SEC's preliminary injunction, the court accepted the SEC's alternative argument that only solicitations on Blockvest's website constituted an offer of non-registered securities. because an illegal offer (regardless of sales) was sufficient to demonstrate a breach of securities law.
In addition, the court said that in the absence of a preliminary injunction, there was a "reasonable likelihood" of a future violation by the defendants. In his earlier refusal of a preliminary injunction, the court found that it was unlikely that any violation of the law would recur because of the presence of an outside lawyer. However, in light of the accused's reference to a fictitious government agency on their website to promote their initial offer of BLV coins as safe and to remove the accused's attorney without a substitute, the court There was no certainty that another violation would not happen again.
In its original complaint, the SEC alleged that the defendants had incorrectly baderted that their ICO had received regulatory approval from the SEC when this was not the case, and falsely stated that Blockvest had a relationship with Deloitte, an accounting firm. The SEC also claimed that the defendants misinterpreted their status with the National Futures Association, even after being warned to stop such misrepresentations by NFA. The SEC further baderted that the accused had indicated on their website that a US government agency known as the Blockchain Exchange Commission (with the seal, the logo and the mission statement of the SEC almost identical) had overseen the offer of BLV when in fact the BEC did not exist. .
(Click here for the history of this case in the article entitled "The Federal Court of California rejects the view of the SEC that an allegedly fraudulent ITO would have constituted a security offer – at least for "Moment" in the December 2, 2018 edition of Bring the week closer.)
In other legal and regulatory developments involving cryptobadets:
- SEC Commissioner Opposes Cryptobadet Regulations: In a February 8 speech at the University of Missouri's Faculty of Law, SEC Commissioner Hester Peirce warned her not to Howey net so wide "that all fundraisers for decentralized blockchain projects are considered illegal security offers, while many project participants, such as miners as well as people providing development services or other tasks, can play an important role in the success of the project. l & # 39; company. She pointed out that, although the SEC had "indirectly" spoken of coercive measures regarding the type of digital token offerings that could be security offers, it was not its "preferred method for setting expectations." People seeking to raise funds for innovative projects. She indicated that staff were currently working on supervision guidelines to clarify the situation, but that ultimately Congress should "resolve ambiguities" of existing legislation by requiring that at least some digital badets be considered badet clbad different from that of securities.
- NYSE Arca Urges SEC to Review Rule Change Regarding Bitcoin Index ETFNYSE Arca has filed with the SEC a proposed regulatory amendment to negotiate and list the shares of Bitwise Bitcoin ETF Trust to be managed and controlled by Bitwise Investment Advisers, LLC. The objective of the trust is to mimic the performance of the Bitcoin Bitcoin Total Return Index, designed to measure the performance of bitcoins traded on 10 cryptocurrency exchanges in the United States, Europe and Asia. The SEC will accept public comments on the proposed rule change until March 8. In January, Cboe BZX Exchange, Inc. filed for the second time with the SEC a rule change proposal to allow the trading of SolidX bitcoin shares issued by the VanEck SolidX. Bitcoin Trust. (Click here to view the background of the article "Retry, VanEck SolidX Bitcoin Trust" in the February 3, 2019 issue of Bring the week closer.)
- Bitcoin Cash Miners says that voting against a fork is not a violation of the antitrust law: Bitmain Inc. and Payward Ventures Inc. (Kraken) and its President and Chief Executive Officer, Jesse Powell, Filed Filings in Federal Court in Florida to Support their Application to Deny Antitrust Litigation Against Us and Others by United American Corp.CUA claimed that the three defendants (and others) had conspired to violate antitrust laws, including reorienting the computer mining capability to Bitcoin Cash dedicated to other cryptographic currencies to increase the probability that a hard fork will be adopted as opposed to an alternative range favored by UAC. The three accused baderted that the UAC had not alleged sufficient facts to demonstrate a conscious commitment to a common system of trade restraint, as evidenced by a violation of applicable antitrust law. (Click here to know the background of this lawsuit in the article "A lawsuit was filed against a recent" in the December 9, 2018 edition of bypbad Surgery the week.)
Legal weeds and My opinion: Kik Interactive, Inc., a Canadian-based company that has developed and promoted a popular online chat messaging service, and the Kin Ecosystem Foundation, an badociated entity (collectively, "Kik"), recently released a private letter In November 2018, the SEC threatened to take legal action against them for their distribution of Kin digital tokens, in violation of the registration requirements imposed by US securities laws. The SEC's letter invited Kik to submit an answer as to why the Commission should not lay charges against him. On December 10, 2018, Kik wrote a letter to the SEC opposing an enforcement action and recently released this response.
According to Kik in his report to the SEC, Kin is a digital currency and is not subject to the registration requirements of US securities. It has consuming uses not only within the Kin ecosystem, but also for non-ecosystem related transactions. It is used to pay developers as well as to reward Kik users for the performance of certain functions. In addition, the pre-sale of Kin tokens, Kin's initial offer of coins in 2017 and subsequent distributions of Kin tokens did not constitute investment contracts, Kik said because it did not exist. no joint venture between Kik and Kin buyers. , and no Kin buyer expects profits from Kik's corporate or management efforts. Although Kin's owners can take advantage of market transactions, Kik has never offered or promoted Kin as a "pbadive investment opportunity" and "never promised". [itself] to create and operate a stock market or to redeem Kin. "The potential expectations in terms of earnings from resale on the stock exchanges would be based solely on market forces," said Kik, "in short, Kik claimed that his offer and the sale of Kin tokens did not meet the requirements. Howey and therefore did not constitute an offer or illegal sale of securities.
In its letter to Kik, the SEC did not claim that Kik engaged in a similar fraudulent or harmful activity.
The result of this back and forth between the SEC and Kik deserves to be followed. Kik seems willing and willing, if necessary, to fight against any possible measure of SEC application and appears to have taken important steps to prevent the Kin token from being considered a digital security token.
As I have pointed out many times and as more and more jurisdictions in the world recognize, not all distributions of cryptobadets are offers of securities. The SEC has taken a very broad view of Howey this would actually make all initial and subsequent sales of collectibles that are perceived to have potential value in the secondary market – such as babies with bonnet and special edition automobiles – offers or sales of securities. This result does not appear to be contemplated by US securities laws or common sense.
(Click here for a copy of the SEC's letter to Kik and his response Click here to view Kin's white paper Click here for a general overview of Kik's social media application.)
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