The U.S. District Court for the Southern District of California (the "Court") granted the SEC's motion for preliminary injunction against Blockvest, LLC ("Blockvest"), a non-operational blockchain-based assets exchange, and its founder to prevent them from allegedly engaging in a fraudulent securities offering. The Court previously denied the SEC's request for a preliminary injunction against Blockvest and its founder, citing disputed issues of material fact over whether the Staff could show that investors bought into the Blockvest initial coin offering ("ICO") with an expectation of making profits from the efforts of others.
As previously covered, the SEC filed a Complaint against Blockvest and its founder for allegedly offering and selling securities in the form of digital assets called "BLVs." The SEC claimed that Blockvest and its founder falsely claimed that the ICO was "licensed and regulated" by any of the regulatory agencies, including the SEC, CFTC and National Futures Association. Further, the SEC alleged that Blockvest and its founder created a fictitious regulatory agency - the so-called "Blockchain Exchange Commission" - with its own fake government seal, logo and mission statement.
The Court ordered Blockvest and its founder to be enjoined from violating Securities Act Section 17 in the offer or sale of any security by "transportation or communication in interstate commerce or by use of the mails." In addition, the Court determined that the SEC proved that the promotion of the ICO of the BLV token was a "security" under the Howey test.
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