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A court in the United States has rejected a claim brought by the Securities and Exchange Commission (SEC) against blockchain assets exchange Blockvest, in a case that could help shape precedent on unregistered securities.
SEC, the regulator tasked with upholding securities law in the U.S., accused Blockvest of promoting an unregistered security, contrary to the law. The firm’s BLV token has come in for scrutiny by the regulator, initially leading to a temporary asset freeze against the company after a preliminary order by the U.S. District Court for the Southern District of California.
However, in the latest twist in the case, a court has found that the SEC failed to demonstrate BLV tokens were unregistered securities, citing the Howey Test model for determining whether an asset falls within the remit of securities law.
According to court documents, a copy of which was secured by CCN, the court is unable to consider the BLV token a security, a material element for any asset being subject to the remit of the SEC.
“At this stage, without full discovery and disputed issues of material facts, the Court cannot make a determination whether the BLV token offered to the 32 test investors was a ‘security,’” the documents noted. “Thus, Plaintiff [the SEC] has not demonstrated that the BLV tokens purchased by the 32 test investors were ‘securities’ as defined under the securities laws.”
Judge Gonzalo P. Curiel went on to decline an application for an injunction against Blockvest, as well as several other related claims against the firm.
The development is a setback for the securities regulator, which has been increasingly active in enforcement action against fraudulent ICOs in recent months. Other cases have been more successful the regulator, with several notable examples of successful enforcement action against ICO promoters.
Just this month, Airfox and Paragon, which both raised millions through their ICOs, were ordered to repay investors, as well as a $250,000 fine each for failing to appropriately register securities, and for selling securities without being a registered dealer or agent.
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