The Securities and Exchange Commission (SEC) has achieved another significant legal victory in its ongoing crackdown on unregistered initial coin offerings (ICOs) in the cryptocurrency market. A federal judge has ruled in favor of the SEC in a case against Rivetz Corp and its CEO, Steven Sprague, finding that they sold unregistered securities through their 2017 ICO.
The SEC filed a lawsuit against Rivetz and Sprague in September 2021, alleging that they had raised $18 million by selling Rivetz tokens (RvT) to over 7,200 investors, including a significant number of US residents. The regulator argued that the RvT tokens were securities and should have been registered with the SEC before being offered to the public.
Sprague, representing himself in the case, contended that the RvT tokens were software products and did not meet the definition of securities under the Howey test. However, Judge Mark Mastroianni of the Massachusetts federal court disagreed, ruling that the tokens were investment contracts and therefore securities.
The judge found that the value of the RvT tokens was directly tied to the success of Rivetz’s business and the development of its security ecosystem. The tokens were not functional or useful on their own, and their value was dependent on future demand and usability.
The SEC’s victory in this case is a significant setback for the cryptocurrency industry, as it reinforces the regulator’s stance on the classification of ICO tokens as securities. It also serves as a warning to other crypto firms that are considering launching ICOs without proper registration.
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The SEC is now seeking injunctive relief and monetary penalties from Rivetz and Sprague. The outcome of this case could have far-reaching implications for the cryptocurrency market, as it could deter other firms from engaging in similar activities.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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