The Securities and Exchange Commission (SEC) has won a default judgment against Thor Technologies and its co-founder, David Chin, for conducting a $2.6 million unregistered offering of digital asset securities.
The SEC filed for default judgment in March, saying that neither Thor Technologies nor David Chin had filed any response to the SEC’s charges. Chin’s LinkedIn shows no updates since he stopped serving as Thor CEO in 2019 when the company closed.
As a result, both Thor and Chin are restrained from participating in any digital asset securities offering. Thor must also pay a disgorgement of $744,555 (plus prejudgment interest of $158,638.06), and both Thor and Chin are to pay penalties of $150,000 each.
The SEC had taken action against both Thor and its co-founders, Chin and Matthew Moravec, over their offering of ‘Thor Tokens’ between March and May of 2018. The tokens were offered to the public in order to fund Thor’s ultimate business of developing a gig economy app that would use blockchain to facilitate instant payments to workers. At the time of the offering, the tokens did not have any practical use, and Thor had yet to develop the software platform that would make use of them.
Moravec settled his case with the SEC shortly after his charges were filed. He agreed to a three-year ban from participating in digital asset security offerings and was ordered to disgorge $407,103 plus prejudgment interest of $72,209.45. He also agreed to pay a civil penalty of $95,000.
Open and shut case for SEC
The facts placed the Thor offering squarely within the bounds of U.S. securities laws. Under the Securities Act, ‘investment contracts’ are defined as securities. Investment contracts themselves are defined by way of the test set out in SEC v Howey (the Howey Test), which says that an investment contract will exist where there is an investment of money into a common enterprise, where that investment is made with the reasonable expectation of profits derived from the efforts of others.
Most interesting in digital asset cases is typically the question of whether the investment was made with an expectation of profits derived from the efforts of others. Fortunately, the activities of Thor and its founders made this a fairly open-and-shut case for the SEC.
Thor’s published white paper is explicit that the Thor tokens were to be issued to fund the development of the gig economy platform as well as building out the Thor team. There was no function to the tokens at the time they were issued, with the white paper saying that “as the network grows, we expect the value of each token to increase as usage of tokens drives demand given their scarcity in a finite pool of available supply.”
Investor money was also pooled together, and thus, according to the SEC, “each investor stood to share on a pro-rate basis in the rise and fall of the value of the tokens.”
The Thor platform never came to fruition, and Chin announced that Thor would be shutting up shop in 2019.
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