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A federal judge partially sided with the SEC, finding that Opporty and its founder, Sergii Grybniak, offered “unregistered securities” in their 2018 ICO.
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The United States Securities and Exchange Commission has been awarded a partial victory in its case against blockchain firm Opporty International and its owner — accusing them of conducting a fraudulent initial coin offering (ICO).
In a Sept. 24 memorandum, US District Judge Eric Komitee said the SEC had proved enough of its claim that Opporty and its owner Sergii Grybniak had unlawfully offered the sale of unregistered securities in the US.
A US judge handed a partial victory to the SEC. Source: US Courts
The SEC first announced it was taking legal action against Opporty and Grybniak in January 2021, accusing the company of conducting a fraudulent ICO by offering the sale of “unregistered digital asset securities.”
Judge Komitee said that under the Howey test, the “OPP” tokens sold by Opporty and Grybniak in their ICO were investment contracts under federal securities laws and needed to be registered with the regulator.
Additionally, the SEC argued that Opporty and Grybniak’s ICO pre-sale violated Section 5 of the Securities Act of 1933, which deals with the registration and distribution of securities.
Throughout the legal proceedings, Grybniak argued that the token sale did not need to be registered because it had been conducted under Reg D/S exemptions — which can apply when transactions don’t involve any public offering, and purchasers are either accredited investors or the sales occur outside the United States.
The judge found that Grybniak made a reasonable defense in arguing against the SEC’s Section 5 claim, saying the SEC’s guidance on crypto offerings had been “so vague and arbitrary that investors have not had a sufficiently definite warning about how the Howey test might apply.”
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But Judge Komitee agreed with the SEC in finding that Grybniak and Opporty failed to meet the exemption requirements of Regulation S since they “undisputedly engaged in ‘directed selling efforts’ in the U.S.”
The Opporty ICO was conducted between September 2017 and October 2018 and raised $600,000 from almost 200 investors both in the US and abroad. The SEC said Opporty broke its rules by not registering the sale.
Opporty marketed itself as providing a “blockchain-based ecosystem for small businesses and their customers,” primarily in the United States. The platform was meant to be a place where small businesses could list their services and enter into agreements via smart contracts.
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This article first appeared at Cointelegraph.com News
