California District Judge Gonzalo Curiel refused to recognize the Blockvest project token as a security, believing that the US Securities and Exchange Commission (SEC) could not prove that it was in the context of the U.S. law, CCN writes.
It is known that Blockvest resorted to various manipulative tactics in the course of its ICO. SEC said that the startup had even specifically established the Blockchain Exchange Commission to create an appearance that their offer is regulated. The commission, however, turned out to be a real organization, but a non-governmental one.
The judge said that the SEC was unable to prove that any promotional materials served as a tool to attract investors, which turned out to be only 32, and the total amount of Blockvest funds raised had not reached $10,000. SEC provided statements that confirmed the purchase of tokens, but Curiel decided that this evidence was not enough to recognize the token as a security in accordance with Howey test.
Blockvest confirmed that its tokens were used exclusively to be tested on exchanges. The main argument was the close friendship of investors with the respondent. The project also pointed out that the plans to collect $2.5 million turned out to be overly optimistic, and his whole idea eventually failed.
The judge ruled that the defendant had already refused to hold an ICO, and the SEC had provided insufficient evidence of their wrongdoings in the past. Thus, he considered the imposition of judicial restrictions to be an unreasonable measure.
This, however, does not mean that Blockvest will be able to avoid charges in the future. The defense did not dispute the fact that its proposal was not registered. The SEC can also change the line of charges and try to get a sentence for Blockvest in another court. The key point in the judge’s decision was the refusal to recognize the BLV token as a security due to the inconsistency and failure to comply with the established standards of its promotion and sale procedures.
“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 decision says.
The U.S. Court sent an emergency order to the SEC to discontinue Blockvest's ICO due to investors' misinformation. The U.S. Securities and Exchange Commission froze the assets of Blockvest LLC and its founder Reginald Buddy Ringgold III and began a lawsuit against the company earlier in October this year.
Blockvest positioned itself as a new decentralized exchange for crypto assets, as well as a crypto index fund that tracks 30 top cryptocurrencies.
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