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28/10/24
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Krohn Challenges SEC’s $18M Fraud Case Amid Crypto Mining Allegations
Kristoffer Krohn, the promoter of Green United, is seeking to challenge an $18 million crypto mining fraud case brought against him by the Securities and Exchange Commission (SEC). He contends that the SEC’s claim that he sold securities is misguided. In a recent filing with a federal court in Utah, Krohn requested that the Tenth Circuit Appeals Court evaluate whether buyers of Green United’s equipment formed a “common enterprise,” a key assertion that the SEC used to claim that the company’s sales constituted unregistered securities transactions under applicable laws.
Krohn argued that resolving this legal question early in the process would be more efficient and serve the interests of justice, sparing him the costs associated with prolonged litigation. This move comes after a district court judge dismissed previous efforts to throw out the SEC’s lawsuit against him and the company’s founder, Wright Thurston. The court determined that the SEC had presented sufficient evidence suggesting that investments in the company’s so-called “Green Boxes” were indeed sales of unregistered securities.
The SEC has targeted multiple cryptocurrency firms in the United States for similar allegations, utilizing the Howey test to assess whether certain financial transactions should be classified as securities. In March 2023, the agency filed suit against Green United, asserting that purchasers of the “Green Boxes” were led to believe their investments would yield returns from mining a token on a nonexistent blockchain, while instead, they received equipment intended for mining Bitcoin.
In his appeal, Krohn emphasized that the SEC failed to demonstrate that purchasers of the Green Boxes had any ownership stake in the operational profits of Green United, insisting that what he sold were simply high-performance computing rigs. He further pointed out that the Tenth Circuit has not yet established definitive legal standards for determining an investment contract within the cryptocurrency domain. If successful in his appeal, Krohn would proceed to present his case to a panel of three judges, although a resolution could take several months.
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