After dismissing its claims last year, a federal court has finally granted victory to the U.S. Securities and Exchange Commission (SEC) in its case against blockchain assets exchange Blockvest.
Judge Gonzalo P. Curiel of the U.S. Court for the Southern District of California placed a preliminary injunction against Blockvest LLC and its founder, Reginald Buddy Ringgold (otherwise known as Rasool Abdul Rahim El) based on past securities violations and newly developed evidence which supports the conclusion that “there is a reasonable likelihood of future violations.”
As described in the ruling, Blockvest is a registered Wyoming company “set up to exchange cryptocurrencies but has never become operational.”
SEC Scores a Major Victory
The Judge ruled that after reviewing evidence and submitted briefings, it concludes that the defendant may have violated federal securities laws by promoting unregistered securities. The Court has placed an injunction against the startup and its founder to prevent further violations.
On the injunction, the judge noted that the Court found “reconsideration is warranted based upon a prima facie showing of Defendants’ past securities violation and newly developed evidence which supports the conclusion that there is a reasonable likelihood of future violations.”
By newly developed evidence, Curiel was referring to the defendant’s counsel motion to withdraw from representing him and his firm based on the defendant’s instruction for the law firm to “file certain documents that counsel could not certify.” Going on to add that, when the counsel refused to file those documents, “Defendants attempted to file such documents with the Court without counsel’s permission or signature, and the documents were rejected by the Court Clerk.”
Beyond Ringgold’s request for his counsel to carry out actions that were unethical, the law firm, Corrigan & Morris LLP, complained about the defendant’s failure to pay for work done. Late payment and accusatory remarks traced to defendants have led to a “complete breakdown in the attorney-client relationship,” the firm explained in its motion to withdraw.
The SEC had suspended Blockvest’s Initial Coin Offering (ICO) in October through an emergency court order, over whether Blockvest’s tokens, BLV tokens, were registered under U.S. securities law. The court had tossed the case out, stating that the SEC had failed to demonstrate that the BLV tokens were in fact securities based on Howey Test.
“At this stage, without full discovery and disputed issues of material facts, the Court cannot make a determination whether the BLV token offered to the 32 test investors was a ‘security,” the documents read.
Thus, Plaintiff [the SEC] has not demonstrated that the BLV tokens purchased by the 32 test investors were ‘securities’ as defined under the securities laws.
The Court had subsequently denied the regulator’s request for an injunction against the blockchain startup, among other demands.
SEC’s Battle with ICO Operators
The agency had settled with CarrierEQ Inc.(Airfox) and Paragon Coin Inc. The arrangement involved the operators to return the funds raised to investors, file periodic reports with the Commission and pay a $250,000 as penalties.
The imposition of the penalties implies both firm’s tokens were deemed to have been securities and are, therefore, required to be registered with the Commission under U.S. federal laws.