Rivetz was founded in 2013 and the now-defunct blockchain hardware firm has been accused of generating $18 million via an unregistered securities offering between July and September of 2017 from more than 7,200 investors.
The SEC’s Sept. 8 complaint names defendants Rivetz Corp., founder Steven Sprague and the firm’s subsidiary Rivetz International. The ICO revolved around the RvT token, which the SEC states was promoted and sold as an investment opportunity and used to capitalize on Rivetz’s business in building an app, ecosystem and cyber security hardware.
The SEC asserts that the defendants touted the value of RvT tokens as “investments that purchasers could buy and sell on the secondary market” despite the product being “not-operational” at the time of offering:
“Token buyers could not purchase any goods and services using RvT tokens, and the tokens had no other use in any Rivetz product or service. In fact, several months after the tokens were distributed […] Sprague stated on social media that Rivetz did not have ‘a specific release date’ for the Rivetz app through which consumers could use the RvT token.”
Investors used Ether to purchase the RvT tokens. Following the initial sale, the SEC alleges that Rivetz and Sprague liquidated all of the Ether received via Rivetz International.
The complaint states the money was used to fund operations, give Spraque a $1 million bonus and a separate loan of $2.5 million which he used to “purchase a house in the Cayman Islands that he then leased back to Rivetz Int’l.”
If the defendants are found guilty the SEC is seeking injunctive relief, the return of what it calls “ill-gotten gains,” prejudgment interest and a civil penalty.
Is the SEC on the war path?
The SEC has been making headlines throughout September as the enforcement body takes action — or threatened to — against multiple crypto firms this month.
On Sept. 2 Cointelegraph reported that the SEC charged notorious Ponzi-scheme BitConnect as an alleged unregistered securities offering that netted $2 billion. Reports surfaced the enforcement body was also investigating decentralized exchange (DEX) Uniswap over its marketing and investor services.
Earlier this week Coinbase CEO Brian Armstrong revealed that the SEC was threatening to sue the firm if it launched a stablecoin yield program it deems as security.
The question shouldn't be, "is the yield product a security?"
The question is, "Why can't a reputable company offer a useful service to customers that want it, without getting sued by regulators in the god damned United States of America?"— Erik Voorhees (@ErikVoorhees) September 9, 2021
SEC’s Investor Advisory Committee to Discuss Crypto on December 2
- SEC’s Investor Advisory Committee will soon discuss crypto and digital assets today.
- This is to ensure serene investor protection and market integrity in the face of new technologies.
The US SEC’s Investor Advisory Committee is on its heels to discuss their nagging concern about crypto and ‘Investor Protection’ on December 2, 2021.
Truth be told, the panel will highlight all the ins and outs of digital assets with a special focus on the regulatory framework that governs them. With no exemption, the authority will take on this event to explore and identify the main lines of intersection of digital assets, sooner rather than later.
They hope to do this with a specific lens to examine the ups and downs of the market issues. Prior to this, the committee will further define the compounding risk and its associated dangers in the emerging technologies in the crypto market.
The SEC's Investor Advisory Committee will be discussing crypto tomorrow. It's a good opportunity for the Commission to rethink its approach to crypto regulation: https://t.co/0OQ5ig3VmP You can submit comments here: https://t.co/WDGSTZ3uhs— Hester Peirce (@HesterPeirce) December 1, 2021
On this note, apart from the crypto discussion, the panel will address various topics regarding blockchain technology, stablecoins, and crypto-based ETFs. All these topics will be treated publicly in one holistic manner under the event.
Moreover, the meeting agenda is quite a solid move that seeks to ensure smooth market integrity. In essence, it aims to also empower a good outlook when it comes to investors’ protection, particularly in the face of new technology.
People think that this occasion is a good opportunity for the SEC to rethink and restructure its harsh crypto regulation approach.
SEC Chair: Innovation Around DeFi “Could Be Real”
Gary Gensler believes that DeFi could offer “real innovation,” but he is convinced that the sector will not survive without regulatory compliance.
U.S. Securities and Exchange Chair Gary Gensler said that new technologies do not tend to persist if they fail to come into compliance with the law during a fireside chat with Jay Clayton at the Digital Asset Compliance & Market Integrity Summit.
While Gensler believes that decentralized finance could be the source of innovation, he claims that it has to fall within the existing regulatory framework:
The innovation around DeFi could be real, but they won’t persist if they stay outside of the regulatory framework.
Gensler also voiced his concerns about the centralization of some DeFi projects and implied that the goal of such projects might be to skirt existing anti-money laundering laws.
Speaking of the regulator’s reluctance to approve a spot Bitcoin exchange-traded fund, Gensler told No. 42 that trading around the globe is not inside the U.S. regulatory register. He urged the trading and lending platform to “come in and talk”:
Trading and lending platforms are really in an important place for investor and consumer protection. Come in and talk to us… work with us. Where appropriate we’ll use the enforcement tool. Work to get registered with the law.
The SEC boss has reiterated that stablecoins remind him of poker chips at a casino:
[Stablecoins] made it more efficient within the ecosystem. But it also allowed people around the globe, the people who tried to, to avoid money laundering and tax compliance in jurisdiction after jurisdiction.
According to Gensler, stablecoins are responsible for 80% of trading on the crypto market.
SEC Commissioner Will Not Say If Ether Is a Security
The SEC remains mum about Ether’s regulatory status amid accusations of picking winners and losers that come from the increasingly frustrated XRP community.
U.S. Securities and Exchange Commissioner Hester Peirce did not answer whether or not Ether, the second-largest cryptocurrency, is a security when asked by her Twitter follower.
Rather than analyzing the status of particular assets, I need to focus on building a sensible and clear regulatory framework for crypto.— Hester Peirce (@HesterPeirce) November 21, 2021
The “Crypto Mom” says that she is willing to build a “sensible and clear” regulatory framework for cryptocurrencies, but she will not focus on particular digital assets.
As reported by U.Today, SEC Chair Gary Gensler has repeatedly dodged the very same question on numerous occasions, making it clear that he will not speak about separate cryptocurrencies to remain neutral.
At the same time, the agency has distanced itself from a 2018 speech made by its former top official William Hinman, in which he famously said that Ether is not a security.
Amid the SEC’s almost year-long legal battle with Ripple, calls for regulatory clarity continue to persist.
Last month, Ripple CEO Brad Garlinghouse opined that Ether had managed to surpass XRP by market capitalization because of the SEC’s “free pass.”
Peirce, despite being a staunch crypto supporter for years, has refused to speak about the Ripple case since SEC Commissioners are prohibited to speak about ongoing litigation or enforcement actions.