- The SEC has accused a Utah-based crypto firm of violating federal securities laws by selling bogus mining equipment worth $18M
- As expected, crypto-community has reacted to agency’s ‘regulation by enforcement’ diktat
The Securities and Exchange Commission (SEC) of the United States has filed a lawsuit against Utah-based crypto-firm Green United. The agency has alleged that the firm violated federal securities laws by selling bogus crypto-mining equipment worth $18 million in return for tokens.
The complaint states that Green United, its founder, and main promoter, offered investments in Green Boxes. These boxes were marketed as specialized cryptocurrency mining machines, capable of mining GREEN tokens on the Green Blockchain. The company raised $18M from investors through this scheme.
Investors were allegedly promised a 40-50% monthly return on the GREEN tokens.
Investors were also allegedly told that the success of their investments is contingent on Green United keeping control of their “Green Boxes.” These would be remotely hosted at a Green United-controlled data center.
Green United’s mining machines, according to the SEC, never mined GREEN tokens because they were not mineable crypto-assets. In fact, the SEC has argued that the Green Boxes were actually S9 Antminers – Bitcoin mining equipment. Furthermore, the so-called Green Blockchain did not exist.
GREEN tokens were instead created on the Ethereum blockchain and distributed to investor wallets several months after the mining machines were purchased in April 2018. According to the complaint, a significant portion of the funds raised was used to fund the company’s operational and promotional activities.
The SEC also claims that the value of GREEN tokens never increased. They could not be traded on a secondary market until the fall of 2020. The current price of $.004 is significantly lower than the promised initial value of two cents per token.
The SEC is seeking permanent injunctions, disgorgement and civil penalties against Green United and the two individuals.
A lot of contradictory opinions
MetaLawMan wrote that the SEC has alleged that selling crypto-mining equipment and providing hosting services for the equipment constitutes an “investment contract” under Howey. The user also accused the SEC of going above and beyond its statutory authority. “The overreach is accelerating. Congress needs to act,” added MetaLawMan.
Multiple users called out the alarmist nature of the “information” shared by MetaLawMan. Casa co-founder and CTO Jameson Lopp responded,
“The issue the SEC has with this operation is not that they were selling mining equipment, it’s that they were selling some stupid token that came with the expectation of future profit as a result of development that the company selling the tokens was promising.”
Timothy Peterson, another prominent cryptocurrency commentator on Twitter, called MetaLawMan’s viewpoint “somewhat of a bad take.” The SEC’s case, he said, is one of alleged fraud. However, Peterson agreed that applying the term “investment contract” to this case is a stretch.
SEC overreaching its jurisdiction over crypto
The latest SEC action is one of a slew of enforcement actions taken by the regulatory body against cryptocurrency companies. The SEC has recently escalated its campaign against unregistered securities, which they claim put investors in risky situations without enough transparency.
The regulatory body last month penalized Kraken with a $30 million settlement, forcing it to end its crypto-staking program in the country. The SEC has also warned Paxos of its plans to sue them for issuing Binance USD (BUSD). The SEC claims that BUSD is an unregistered security.
The crypto-community has repeatedly claimed that the SEC continues to overstep its jurisdiction in issuing regulations pertaining to crypto-assets.
Last month, the SEC Commissioner Hester Peirce herself challenged the latest proposal from SEC Chair Gary Gensler and the SEC regarding crypto-custody in the United States.
“In what is becoming something of a habit, the Commission is once more proposing to dictate contract provisions involving entities the Commission does not regulate,” Peirce wrote in her letter. She added,
“The Commission does not have authority to regulate custodians directly, but we propose to regulate them indirectly. Given our lack of regulatory authority, who would be on the hook if a qualified custodian failed to satisfy these requirements?”
This article originally appeared here.
Here’s How To Stay Up To Date On Crypto With CryptosRUs!
Learn about Bitcoin, Ethereum, and so much more at the CryptosRus Academy.
For the best exchanges, check out our top exchange guide.
Secure your crypto with Ledger and Trade your way to victory with help from LuxAlgo
Sign up for our bi-weekly newsletter for news and exclusive analysis.
Follow CRU News Desk on Twitter for our latest articles and Twitter exclusive threads.
Stay up to date with George on Tik Tok, Instagram, and his brand new clips channel.