SEC has no authority over crypto, argues defendants in $18M fraud lawsuit

The NFT Unicorn 0622a0b2-5be3-4646-a971-ced1777d5812 SEC has no authority over crypto, argues defendants in $18M fraud lawsuit Crypto News

Two people accused of running a fraudulent $18 million crypto mining scheme by the United States securities regulator are seeking a dismissal of the lawsuit, arguing in court the agency has no authority over cryptocurrency.

On May 19, Wright Thurston and Kristoffer Krohn separately filed motions to dismiss a lawsuit from the Securities and Exchange Commission (SEC).

The pair, along with the purported crypto mining and development firm Green United LLC were sued by the SEC in March — accused of fraudulently offering securities through selling “Green Boxes” and “Green nodes” marketed as miners for the GREEN token on the “Green Blockchain.”

The company was founded by Thurston and contractually promoted by Krohn.

In their arguments for the lawsuit’s dismissal, Thurston and Krohn claimed the SEC has no authority over the digital asset ecosystem, adding Congress “considered and rejected” the SEC’s authority over crypto.

An excerpt from the defendants’ motion to dismiss. Source: PACER

They added the SEC has been “unclear and inconsistent” in defining crypto and echoed recent suggestions that the regulator was undertaking “regulation by enforcement,” adding:

“The SEC has instead abandoned any effort at proposed legislation or rulemaking, opting instead to attempt to litigate its way to a coherent regulatory scheme.”

In other arguments to dismiss the case, the pair claimed the SEC has not established the Green Boxes were securities offerings or “investment contracts” as the regulator claimed in its March complaint.

Related: Ripple vs. SEC: Could newly released documents tip the balance?

In its March suit, the SEC claimed the hardware sold by Green United were actually Bitcoin (BTC) mining rigs that didn’t mine GREEN as advertised and the purported blockchain never existed.

The alleged scheme raised around $18 million according to the regulator and investors “did not receive” any of the BTC mined by Green United.

SEC chair Gary Gensler has long asserted the Commission’s authority over crypto and has said most crypto assets sans Bitcoin are securities under the Howey test.

Magazine: Crypto regulation — Does SEC Chair Gary Gensler have the final say?