## Facts

- The SEC brought an enforcement action against Blockvest, LLC and its founder Reginald Buddy Ringgold, III, alleging unlawful promotion of an ICO for “BLV” tokens and related crypto investment products.
- Blockvest marketed itself as the “First Licensed and Regulated Tokenized Crypto Currency Exchange & Index Fund based in the US.”
- Promotional materials and a white paper stated or implied that BLV purchasers could receive passive income and “double-digit returns,” including a pro rata share of Blockvest profits.
- The SEC alleged Blockvest falsely claimed regulatory authorization or oversight, including: unauthorized use of the SEC seal; false claims of CFTC and NFA approval; continued claims after an NFA cease-and-desist letter; and creation of a fictitious “Blockchain Exchange Commission” with a seal and address closely resembling the SEC’s.
- Defendants asserted BLV was merely a “test token” for platform “testers,” claimed there was only one “real” investor, and argued a different token would be used for any future public offering.
- The court initially denied a preliminary injunction, reasoning the SEC had not made a prima facie showing that BLV was a security as to the alleged recipients.
- The SEC sought reconsideration, arguing the court misapplied Howey by focusing on recipients’ subjective intent and that promotional materials constituted actionable offers under Securities Act § 17(a) even without completed sales.

## Issues

1. Whether BLV tokens, as promoted, were “investment contracts” (and thus “securities”) under an objective Howey analysis focused on economic reality.
2. Whether Blockvest’s website and marketing materials constituted an “offer” of securities for purposes of Securities Act § 17(a) without requiring contract-law “intent to be bound.”
3. Whether the SEC showed a likelihood of success and other prerequisites for a preliminary injunction on its § 17(a) antifraud theory.

## Decision

- The court granted the SEC’s motion for reconsideration in part.
- The court held the SEC showed a likelihood of success that BLV, as promoted, was an investment contract under Howey.
- The court held Blockvest’s marketing and website materials (including solicitations to acquire BLV) constituted “offers” under the Securities Act.
- The court found a sufficient prima facie showing that defendants made materially false or misleading statements in connection with those offers.
- The court entered a preliminary injunction based on Securities Act § 17(a), reversing its earlier denial to the extent necessary to enjoin fraudulent offers.

## Legal Principles

- Whether a token is a “security” under Howey turns on the objective economic reality of the scheme and promotional representations, not recipients’ subjective understanding or the issuer’s “test token” label.
- An “offer” under the Securities Act is broadly defined to include solicitations and efforts to obtain purchases of securities; it is not limited to communications that would form a binding contract under state contract law.
- Promotional statements implying regulator approval or oversight (including misuse of official seals, false claims of licensing or membership, and fabrication of regulator-like entities) can support a § 17(a) antifraud claim when made in connection with securities offers.
- For preliminary injunctive relief in an SEC enforcement action, a showing of likely success on an antifraud theory and the risk of ongoing investor harm and public-interest considerations can justify enjoining continued offering activity pending final adjudication.

## Conclusion

The court concluded that Blockvest’s ICO promotion objectively offered an investment contract and that its solicitations and marketing materials qualified as securities “offers,” making alleged regulatory-approval misrepresentations actionable under Securities Act § 17(a) and warranting a preliminary injunction to halt further fraudulent offering conduct.


Sec. & Exch. Comm’n v. Blockvest, LLC, 2019 WL 625163 (S.D. Cal. Feb. 14, 2019)