SEC’s Latest ‘GREEN’ Lawsuit Fuels Mixed Opinions and FUD

  • The SEC has charged a Utah-based crypto firm with violating federal securities laws by selling counterfeit mining equipment worth $18 million
  • As expected, the crypto community has responded to the agency’s “regulation through enforcement” dictate

The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Utah-based crypto firm Green United. The agency has alleged that the company violated federal securities laws by selling counterfeit crypto mining equipment worth $18 million in exchange for tokens.

The complaint states that Green United, the founder and main promoter, offered investment in Green Boxes. These boxes were marketed as specialized cryptocurrency mining machines, capable of mining GREEN tokens on the Green Blockchain. The company raised $18 million from investors through this arrangement.

Investors were reportedly promised a monthly return of 40-50% on the GREEN tokens.

Investors were also told that the success of their investments depends on Green United maintaining control over their ‘Green Boxes’. These would be hosted remotely in a data center controlled by Green United.

According to the SEC, Green United’s mining rigs never mined GREEN tokens because they were not minable crypto assets. The SEC has even argued that the Green Boxes were actually S9 Antminers – Bitcoin mining equipment. Furthermore, the so-called Green Blockchain did not yet exist.

Instead, GREEN tokens were created on the Ethereum blockchain and distributed to investors’ portfolios a few months after the mining machines were purchased in April 2018. According to the complaint, a significant portion of the money raised was used to fund the company’s operational and promotional activities.

The SEC also claims that the value of GREEN tokens has never increased. They could not be traded on a secondary market until the fall of 2020. The current price of $0.004 is significantly less than the promised initial value of two cents per token.

The SEC is seeking permanent injunctions, restitution and civil sanctions against Green United and the two individuals.

Lots of conflicting opinions

MetaLawMan wrote that the SEC has asserted 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 beyond its legal authority. “The overreach is accelerating. Congress must act,” MetaLawMan added.

Multiple users mentioned the alarming nature of the “information” shared by MetaLawMan. Casa co-founder and CTO Jameson Lopp responded,

“The problem the SEC has with this operation is not that they were selling mining equipment, but that they were selling a stupid token that came with an expectation of future profits from the development promised by the company selling the tokens.”

Timothy Peterson, another prominent cryptocurrency commentator on Twitter, called MetaLawMan’s stance “somewhat a bad view.” The SEC’s case, he said, is one of alleged fraud. However, Peterson agreed that it is difficult to apply the term “investment contract” to this case.

SEC is overstepping its jurisdiction over crypto

The latest SEC action is one of many enforcement actions taken by the regulatory body against cryptocurrency companies. The SEC 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 about 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 related to crypto assets.

Last month, SEC Commissioner Hester Peirce himself challenged SEC Chairman Gary Gensler and the SEC’s latest proposal regarding crypto custody in the United States.

“In what is becoming common practice, the Commission is again proposing to impose contractual clauses involving entities that the Commission does not regulate,” Peirce wrote in her letter. She added,

“The Commission does not have the power to regulate custodians directly, but we propose to regulate them indirectly. Given our lack of regulatory authority, who would get on the hook if a qualified custodian did not meet these requirements?”

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