The U.S. Securities and Exchange Commission (SEC) has scored another victory against a cryptocurrency company, in its lawsuit against Rivetz Corp and its CEO, Steven Sprague.
In a September 30 ruling , Massachusetts federal judge Mark Mastroianni agreed with the SEC that Sprague, through Rivetz, sold unregistered securities by offering the Ethereum-based Rivetz Token , or RvT, to individuals in the United States.
The regulator sued the defunct blockchain hardware company with Sprague in September 2021, alleging it sold $18 million worth of Rivetz Token in 2017 to more than 7,200 investors, a third of whom were in the United States.
Neither the SEC nor Sprague dispute the facts of the case, but Sprague — who is representing himself — maintains that the Token is a software product and not an investment contract under the Howey standard as the SEC alleges.
However, Judge Mastroianni wrote that “from the initial announcement of the ICO until its completion, Rivetz and Sprague made representations to potential purchasers that the value of the RvT Token was clearly tied to Rivetz’s goal of creating a security ecosystem for mobile devices.”
Highlights from Judge Mastroianni’s order note that Rivetz had said their efforts would spur demand for the RvT Token . Source: CourtListener
He added that these Token “act as ERC-20 Token but have no intrinsic value or use because Rivetz does not yet have a functional security ecosystem.”
The judge wrote that the value of the RvT Token “is directly dependent on Rivetz’s entrepreneurial efforts” — meeting a Howey standard that shows the Token buyer expects to profit from their efforts.
The Token are also promoted “as a functional part of the Rivetz security ecosystem,” and their value “depends on future demand and potential use,” Judge Mastroianni wrote, meeting other standards that define the Token as securities.
The SEC is required to confer with Sprague and submit a proposal for injunctive relief and monetary damages by October 22.
Sprague did not immediately respond to a request for comment.
This comes after the SEC won a partial victory in its case against blockchain company Opporty International on September 24. A New York federal judge concluded that the company and its founder, Sergii Grybniak, sold $600,000 worth of unregistered securities through an ICO in 2017 and 2018.
