The Securities and Exchange Commission had a setback in its bid to get an injunction against Blockvest which hosted an ICO which the SEC deems sale of securities. A US District US District court Judge Gonzalo Curiel of the Southern District of California declared that the commission did not provide enough evidence showing that the ICO hosted by Blockvest actually sold securities.
The argument which was built around a 1946 law which depends on three metrics had the judge declare that the SEC failed to prove that the investors were expecting to make profit. Judge Curiel based his decision on the fact that Blockvest token was presented by the defendants as a test token for their exchange.
The SEC alleged that the Blockchain Exchange Commission (BEC) which Blockvest fronts was formed to lure investors into believing that the agency endorsed the project. The BEC though has no official documentation proving that it has any form of registration.
The judge said that the SEC ought to have proven through the sort of publicity material that Blockvest used that the investors were eager for profit. The fact that the funds raised by Blockvest was just under $10,000 did not help the SEC quest. The Blockvest team also claimed that the investors were acquainted being numbered just 32 persons.
The evidence produced by SEC that the investors were paying for the coin through checks presented to the court did not sway the judge who ruled that the SEC had not proven the Howey test.
Nothing To See Here, Your Honor
The Blockvest defense was predicated on the tokens being used solely for testing the exchange and that the investors are people well known to defendant Reginald Buddy Ringgold III, and that claims they had made online regarding the raising of “$2.5 million” were overly optimistic, relied on a single investor, and that that deal had fallen through.
The judge ruled that there was no basis to grant the SEC injunction since the firm had agreed not to pursue the ICO further stating that the SEC could not prove that Blockvest had done something wrong.
It is apparent that the SEC will not take it lightly with a firm like Blockvest falsely representing that it had approval of the agency despite the ruling. SEC will likely approach issues relating Blockvest in another court to ensure that it gets reliefs it sought.
Investors are increasingly realizing that good investments don’t come easily even with SEC’s increased monitoring of ICOs.
In any case, Blockvest agreed that it did not register with SEC, which is considered breaking on the law. So the company cannot be said to be off the hook even though their token has not been declared security by the court.
“Based on the above, the Court DENIES Plaintiff’s motion for preliminary injunction. The Court also DENIES Defendants’ ex parte motion for evidentiary hearing and leave of court to file supplemental declarations. (Dkt. No. 30.) The Court also STRIKES Plaintiff’s Supplemental Declaration of David Brown and Defendants’ Opposition and Response. (Dkt. Nos. 39, 40.)”
The situation means that Blockvest assets are not frozen.According to their lawyer Stanley Morris, it’s not over, as he told Law.com:
“Relieved of the constraints of the TRO, our clients are now free to defend themselves through trial and look forward to being vindicated.”