A U.S. federal judge has ruled in favor of the Securities and Exchange Commission (SEC) in a legal battle involving Rivetz Corp and its CEO, Steven Sprague.
The SEC accused Rivetz of selling unregistered securities through an Initial Coin Offering (ICO) in 2017. This decision marks another win for the SEC as it continues its crackdown on crypto companies that allegedly violate securities laws.
The Case Against Rivetz
Rivetz is a now-defunct blockchain company. It raised $18 million through an ICO by selling Rivetz (RvT) tokens. However, the SEC claimed that Rivetz offered these tokens to over 7,200 investors, with a bulk of them in the United States.
ICOs are a common way for crypto startups to raise funds. However, the SEC often scrutinizes them to check if the tokens sold breach US securities law.
In Rivetz’s case, Judge Mark Mastroianni, presiding over the case, agreed with the SEC’s claims. He ruled that the RvT tokens were unregistered securities. The federal judge faulted Sprague for failing to file the necessary registration with the SEC before launching the ICO.
Sprague argued that tokens were software products. However, Judge Mastroianni maintained that their value depended on Rivetz’s plans being successful. This makes the tokens a security based on the Howey test.
The court has asked the SEC and Rivetz’s CEO to submit a proposed judgment for penalties and other relief by October 22, 2024. Sprague has until November 5, 2024, to file any objections.
I would have commented if they had reached out.
This case is a new stretch. No secondary market was offered or promoted.
The promise to enhance a product is now a securitySEC wins case against defunct crypto firm over $18M ICO https://t.co/kEsJ3oLsN5 via @cointelegraph
— steven sprague (@skswave) October 1, 2024
A Broader Trend
This case is just one of many in the SEC’s ongoing efforts to regulate the crypto space. In recent years, the SEC has filed suits against various crypto companies, including Coinbase and Binance, alleging that they facilitated the trading of unregistered securities.
The case against Rivetz reinforces the SEC’s stance that many ICOs involve securities and must comply with federal laws.
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