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A US federal judge found Rivetz and its CEO Steven Sprague sold unregistered securities when it offered an Ethereum-based token in 2017.
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The United States Securities and Exchange Commission has scored yet another win against a crypto firm over an initial coin offering (ICO) — winning a judgment in a case against Rivetz Corp and its CEO, Steven Sprague.
In a Sept. 30 order, Massachusetts federal court judge Mark Mastroianni agreed with the SEC that Sprague, through Rivetz, sold unregistered securities by offering the Ethereum-based Rivetz, or RvT, token to US persons.
The regulator sued the defunct blockchain hardware firm and Sprague in September 2021, alleging they sold $18 million worth of Rivetz tokens in 2017 to over 7,200 investors, a third of which were in the US.
Neither the SEC nor Sprague disputed the material facts of the case, but Sprague — who represented himself — claimed the token was a software product and not an investment contract under the securities-defining Howey test, as the SEC alleged.
But Judge Mastroianni wrote that “from the first announcement of the ICO through its completion, Rivetz and Sprague made statements to potential purchasers that clearly tied the value of RvT tokens to Rivetz’s goal of creating a security ecosystem for mobile devices.”
Highlighted excerpt of Judge Mastroianni’s order noting that Rivetz had said its efforts would drive demand for the RvT token. Source: CourtListener
He added the tokens “were functional as ERC-20 tokens but had no additional uses or inherent value because Rivetz did not yet have a functional security ecosystem.”
The judge wrote that the value of the RvT token “was directly dependent on Rivetz’s entrepreneurial efforts” — meeting a prong of the Howey test showing token buyers expected profits from his efforts.
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The tokens were also billed “as a functional part of the Rivetz security ecosystem,” and their value “was dependent on future demand and usability,” Judge Mastroianni wrote, meeting other prongs that defined the token as a security.
The SEC was told to confer with Sprague and file a proposal for injunctive and monetary relief by Oct. 22.
Sprague did not immediately respond to a request for comment.
It comes after the SEC partially won a case against blockchain firm Opporty International on Sept. 24. A New York federal court judge found that the firm and its founder, Sergii Grybniak, had sold unregistered securities through its $600,000 ICO in 2017 and 2018.
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This article first appeared at Cointelegraph.com News
