IPOFLOW: Examining the significance of the SEC's loss in declaring the Blockvest ICO token a security
NEW YORK, Dec. 20, 2018 /PRNewswire/ -- Leading equity Regulation A+ offerings platform, www.ipoflow.com discusses a recent ruling on the ICO tokens issued by Blockvest. Delving into the ruling and the surrounding factors, www.ipoflow.com breaks down what this ruling could mean for the cryptocurrency community at large.
When digital assets and identity company Blockvest began distributing ICO tokens in mid-2018, it signaled something of a shift in the cryptocurrency space. The company issued 32 ERC20 tokens to investors, each of whom paid no more than $10,000 for the tokens they received. Eventually, these transactions gained the attention of the Securities and Exchange Commission, and that's when everything changed.
In October, the SEC stepped in and suspended sale of the tokens, claiming that their sale represented a security. They further announced that in selling these tokens, Blockvest was taking part in the illegal sale of securities. The SEC backed up their claim with an accusation that the tokens didn't pass the Howey Test, a measure established by the SEC to determine whether a transaction qualifies as an investment contract and, as such, is subject to regulations of the Securities Act of 1933. As the case against Blockvest was reviewed, U.S. Judge Gonzalo Curiel of the Southern District of California froze the company's assets.
After evaluating the evidence and assessing it against the defense posed by Blockvest, Judge Curiel disagreed with the SEC. In November, he ruled that the SEC had not provided enough evidence to prove that the Blockvest tokens should be considered securities. Thus the preliminary SEC request for an injunction against Blockvest backers was denied.
What this ruling means for Crypto
One thing that's significant about this case is that it's the first time the SEC has been unable to show that a digital ICO asset is a security, per the Howey Test. We'd like to be able to say this is a win for all of crypto, rather than simply for Blockvest, but that's not the case. Now let's talk about why.
Key facts in the SEC's complaint against Blockvest were found by Judge Curiel to be disputable, which means that the SEC didn't submit sufficient evidence to prove their case. Since that is the standard before an indictment, and it was not met, the SEC has no case.
Had the SEC gone to court and proven their case, thus indicting Blockvest and moving to a trial, the judge's ruling in the trial would have more widespread meaning to the crypto community, as there would have been a decision based on the merits of the case.
Despite the lack of a trial it is still essential for the crypto community to examine what happened here and attempt to learn from it. One of the reasons the judge disagreed with the evidence presented is because Blockvest explained that they were issuing the tokens as a means to test the exchange, not to create promised profit for investors. Further, Blockvest sold the tokens to friends of the company's founder, Reginald Buddy Ringgold III, not to investors at large.
When considering the relevance of the Howey Test, which is based on a 1946 case the SEC brought against a Florida company selling citrus grove real estate contracts, there must be an expectation of profits from the investment. In the case of the Blockvest tokens, if investors were aware that they were buying a token to test an exchange, there would be no reasonable expectation of a profit. Because the SEC wasn't able to provide any marketing materials from Blockvest that focused on profit potential, they could not prove their case.
Blockvest may have won the battle, but it isn't entirely free and clear at this point. The company did use the SEC logo on its materials, which could provoke penalties coming their way.
About IPOFLOW:
IPOFLOW is a leading equity Regulation A+ offerings platform opening up the IPO process to everyone. Operated by Adamson Brothers, Corp., IPOFLOW specializes in providing small companies with channels to general public growth capital utilizing Regulation A+. With a team of professionals possessing over 30 years of business, financial and investment banking experience, IPOFLOW offers clients expert advice in corporate structure, corporate financial planning, branding, marketing and business development.
Contact Information
IPOFLOW
Andy Altahawi
aadamson@adamsonbrothers.com
www.ipoflow.com
Tel. 1-646-694-0051
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SOURCE IPOFLOW
