Blockvest Slammed with Legal Action for “Fraudulent Offers of Securities” in California
Blockvest is a crypto startup, but it looks like they are not exactly complying with the regulations that the U.S. Securities and Exchange Commission have in mind. In the U.S. District Court for the Southern District of California, Judge Gonzalo P. Curiel has issued a preliminary injunction against the startup and the founder.
The allegations state that Blockvest created “fraudulent offers of securities,” according to a report from The Block. In November, the SEC’s request to file the preliminary injunction were originally denied. At the time, the judge said,
“Plaintiff [SEC] has not demonstrated that the BLV tokens purchased by the 32 test investors were ‘securities' as defined under the securities laws.”
The funding was originally raised through an initial coin offering (ICO) to support their creation of the crypto trading platform. The current court documents stated that the Judge decided that:
“the SEC has demonstrated that the promotion of the ICO of the BLV token was a ‘security' and satisfies the Howey test.”
The reason that the courts were willing to see the case again as a result of “newly developed evidence,” along with new information about violations that happened in the past but had not been addressed in the last case.
Curiel commented that this evident gave the court a reason to believe that there would be future violations as well. The SEC says that the plaintiff was not correctly stating the regulatory compliance of Blockvest to their investors. Instead, both the founder and the platform itself used
“the SEC seal without permission and falsely claimed that their crypto fund was ‘licensed and regulated.' Furthermore, Ringgold also promoted his firm's ICO with a fake regulatory agency which he named “Blockchain Exchange Commission.”
Curiel clarified that the new evidence includes that the defense counsel for Ringgold originally aimed to withdraw themselves from his representation after the defendants told them to:
“file certain documents that counsel could not certify.” He added, “In fact, when defense counsel declined to file the documents, Defendants attempted to file such documents with the Court without counsel’s permission or signature and the documents with the Court without counsel’s permission or signature and the document were rejected by the Court Clerk.”
To make matters even worse, the law firm (Corrigan & Morris LLP) even accused Ringgold of not paying the firm for work, while Ringgold already “levied serious accusations” against his legal team. The firm added,
“Between November 27, 2018 and the date of this filing, there has been a complete breakdown in the attorney-client relationship.”
Though there has yet to be a determination of if the BLV tokens are actually securities, he noted that there’s not enough evidence to prove that the sale of securities happened.