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A judge in San Diego denied on November 27 a proposal for a precautionary injunction against Blockvest by the United States Security Commission (SEC), in what appears to be the first federal decision in which the defendant is a digital asset offered during an ICO. While the ruling could be a great stop for the SEC, it is unlikely to affect its approach to the ICO market.
The court's decision document states that Gonzalo Curiel, the judge in charge of the case in the Southern District of California, has twice previously granted a request by the SEC party for a temporary restraining order (TRO) and the freezing of assets, ensuring time a quick discovery against Blockvest in October and at the beginning of November.
After a series of hearings, and taking into account court records and supporting documentation from both sides, Judge Curiel ruled that the SEC did not prove that investors who bought into Blockvest ICO were buying a "investment contract"Classified a security under the Securities Act. At the time of printing, the SEC did not comment on the judge's decision.
Real background
In its complaint, the SEC claimed that the defendants (Blockvest and Reginald Buddy Ringlod III a.k.a Rasool Abdul Rahim El Blockvest founder) falsely promoted their ICO as registered and approved by the SEC. The Defendants also used the SEC seal on their website without its prior approval, approval or approval.
In addition, the SEC claimed that Blockvest promoted the fact that their ICO has the approval of the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) using their logos and seals under the heading "Under the useful eye of the CFTC and the NFA. "The judicial document also states:
"The Defendants also created a fictitious regulatory agency, the Blockchain Exchange Commission (& # 39; BEC & # 39;), creating their own fake government seal, logo and mission statement that are almost identical to the seal , the SEC logo and statement of intent. Furthermore, the BEC office is the same address as the SEC headquarters. "
In his defense response, Blockvest's lawyers proclaimed that the company did not sell BLV token to the public during its Pre-ICO, but used those tokens for "analysis"Aim during the development of their platform. The defendant admitted that 32 testers actually put a total of about $ 10,000 in bitcoin and ether, as opposed to the statement that the company had raised about $ 2.5 millions in external investments and was looking to raise up to $ 100 million from its ICO.
Blockvest also stated that it intends to issue a new utility token called BLVX on the NEM Blockchain to be used exclusively in its exchange. The court document reports:
"The defendants argue that there is no joint venture and that the tokens do not represent an interest or an obligation of a company or another company, so the Defendants claim that the BLV token is not a security ".
Judge Curiel concluded that the SEC failed to demonstrate that investors bought into Blockvest ICO with a reasonable expectation of making a profit based on the company's management and operating efforts, thus denying its motion for a preliminary injunction against Blockvest and its founder.
What does the Court's decision for XRP imply?
In fact, Ripple's centralized nature has been a controversial point when it comes to a final decision by XRP, its native token, as a SEC security vehicle, in addition to the trust shown on several occasions by company representatives and spokespeople. XRP not be as such.
In fact, SEC officials reiterated that decentralized digital assets would not be classified as securities to which Ripple claimed that the existence of XRP did not depend on the existence of Ripple Labs.
The company has already received a $ 450,000 penalty in a civil enforcement action in 2015, for the sale of XRP without prior registration to the Network for Financial Crimes (FinCEN), and without implementing an appropriate AML procedure. However, according to Ripple, the Howey test used by the SEC to judge whether a good is a title or not, would undeniably indicate that XRP is not.
Ripple explains that XRP owners have no rights to the company and that XRP tokens do not represent Ripple shares or dividend rights holders. The company also stresses that it never claimed that the XRP value would increase, undermining the "expectation of earning from the efforts of a third party,"A fundamental pillar of Howey's test.
So, the judge's decision on the particularity of proving the "earning expectation"It could be significant in what looked like a strong case against Ripple.
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