SEC Takes on Another ICO…and Loses

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BlockVest, a cryptocurrency ICO that aimed to create a “smart economy” on the blockchain, scored a victory over the Securities and Exchange Commission (SEC) last week. After much deliberation, a judge threw out a claim that it was selling unregistered securities. The news comes amid a crackdown by the SEC on startups and individuals who promote them, but his defeat might necessitate a review of how they tackle ICOs going forward.

When is a Security Not a Security?

The BlockVest case erupted less than three weeks ago, when the SEC halted the planned ICO via an emergency court order, citing that BlockVest’s BLV tokens amounted to unregistered securities. The case came to court last week, where the SEC were knocked back by the judge, who ruled that their evidence was not compelling enough, stating: “…without full discovery and disputed issues of material facts, the Court cannot make a determination whether the BLV token offered to the 32 test investors was a ‘security’.”

BlockVest agreed to cancel the ICO as part of their defense, although as BlockVest CEO Reginald Buddy Ringgold III was the only investor at the time of the SEC intervention, this will have little impact, compared to other scrapped ICOs where the public has lost out.

Down but Not Out

Until the BlockVest case, the SEC had a 100% strike rate against ICOs and promoters, with Paragon and Airfox projects being fined and investors allowed refunds. While celebrity promoters Floyd Mayweather and DJ Khaled have been fined for not revealing payments from ICOs in return for promotion.

The SEC announced this week that their regulatory gaze could now fall on high profile social media personalities who may have promoted ICOs without revealing payments, so we can expect more court cases to follow, although the SEC will be hoping for better luck next time around.