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01/10/24
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SEC Wins Legal Battle Against Rivetz Corp Over Unregistered ICO Securities
The U.S. Securities and Exchange Commission (SEC) secured a significant legal victory against Rivetz Corp and its CEO, Steven Sprague, concerning unregistered securities in the form of an initial coin offering (ICO). In a recent ruling, a federal court in Massachusetts supported the SEC’s claim that Rivetz, under Sprague’s leadership, engaged in the sale of the Ethereum-based Rivetz token (RvT) to American investors without proper registration.
The SEC’s lawsuit, initiated in September 2021, accused Rivetz of raising approximately $18 million by marketing Rivetz tokens to over 7,200 investors, a sizable portion of whom were located in the U.S. Throughout the proceedings, both the SEC and Sprague acknowledged the core facts of the case while Sprague argued that the RvT token was merely a software product, not an investment contract as per securities law interpretations.
However, the presiding judge determined that from the onset of the ICO, Rivetz and Sprague made representations that directly connected RvT token value to the company’s efforts to develop a security ecosystem for mobile devices. The court noted that although the tokens functioned as ERC-20 tokens, they lacked intrinsic value or utility since Rivetz had not yet established the promised ecosystem. The judge emphasized that the potential profits from RvT tokens were dependent on Rivetz’s business pursuits, thereby satisfying the criteria of the Howey test that classifies certain transactions as securities.
The court directed the SEC to work with Sprague to propose both injunctive and monetary relief by October 22. This judgment follows another recent SEC victory against Opporty International, wherein the court found that the blockchain firm had similarly sold unregistered securities during its ICO efforts.
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