The United States Securities and Exchange Commission (SEC) has scored another victory in a case against Rivetz and its CEO, Steven Sprague. The court ruled in favor of the SEC, recognizing the sale of RvT tokens as unregistered securities.
Background of the Case Against Rivetz
On September 30, Massachusetts federal court judge Mark Mastroianni agreed with the SEC's assertion that Sprague, through Rivetz, sold unregistered securities by offering the Ethereum-based Rivetz (RvT) tokens to US persons. The regulator sued the defunct blockchain hardware firm and Sprague in September 2021, alleging they sold $18 million worth of Rivetz tokens in 2017 to over 7,200 investors, a third of whom were in the US.
Court's Decision
Steven Sprague, who represented himself, claimed the token was a software product and not an investment contract under the securities-defining Howey test. However, Judge Mastroianni noted that from the first announcement of the ICO through its completion, Rivetz and Sprague made statements tying the value of RvT tokens to the creation of a security ecosystem for mobile devices. He added that the tokens were functional as ERC-20 tokens but had no additional uses or inherent value because Rivetz did not yet have a functional security ecosystem. The judge emphasized that the value of the RvT token was directly dependent on Rivetz's entrepreneurial efforts, meeting a prong of the Howey test showing token buyers expected profits from these efforts.
Implications and Further Actions
The court ordered the SEC to confer with Sprague and file a proposal for injunctive and monetary relief by October 22. Sprague did not immediately respond to a request for comment. This ruling follows another partial victory for the SEC in a case against blockchain firm Opporty International on September 24, where a New York federal court judge found that the firm and its founder, Sergii Grybniak, had sold unregistered securities through its $600,000 ICO in 2017 and 2018.
The court's decision in the Rivetz case underscores the SEC's ongoing efforts to regulate the cryptocurrency market, particularly with regard to unregistered securities. These measures aim to protect investors and maintain the integrity of financial markets.
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