In a landmark ruling, Southern District of California Judge Gonzalo Curiel declared that a classification by the US Securities and Exchange Commission (SEC) on an ICO as security is not justified. Blockvest’s ICO was declared as a security by the SEC earlier and the judge was of the opinion that it had failed to show enough justification.
The court had used a case from some 70 years ago as an example, that had defined three tests that would determine if the tokens used fell under the category of securities. In this instance, the judge was not convinced the tokens did.
SEC had claimed that the token platform attracted investors through showing it would be profitable to fund their tokens, going as far as to claim that the platform had created its Blockchain Exchange Commission for that very specific purpose.
In its defense, Blockvest said that the tokens were used for the explicit purpose of testing the working environment of the exchange. The investors, according to the platform, were close friends who were willing to test the system. The platform told the judge that it had no plans to further pursue an ICO and any wrongdoings claimed by the regulator were unsubstantial.
The judge agreed and the court declared: “Based on the above, the Court DENIES Plaintiff’s motion for preliminary injunction. The Court also DENIES Defendants’ ex parte motion for evidentiary hearing and leave of court to file supplemental declarations. (Dkt. No. 30.) The Court also STRIKES Plaintiff’s Supplemental Declaration of David Brown and Defendants’ Opposition and Response. (Dkt. Nos. 39, 40.).”
Blockvest is not getting off unscathed, however. It does not dispute that it had failed to register with the SEC and even claimed that it was were approved by the commission. The SEC still has these avenues open to pursue future claims against Blockvest.
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