## Facts

- The SEC sued Blockvest, LLC and its founder/chairman, Reginald Buddy Ringgold III, alleging federal securities-law violations tied to planned fundraising through a “BLV” token offering and related crypto products.
- The SEC alleged Blockvest’s marketing falsely suggested regulatory registration/approval, including use of the SEC seal and creation of a lookalike “Blockchain Exchange Commission” with similar name, seal, and the SEC’s headquarters address.
- The SEC asserted Blockvest raised about $180,000 through BLV-related activity, including 32 website “buy now” purchases and 17 investments associated with an entity called Rosegold.
- Defendants disputed that BLV tokens were sold to the public, claiming the 32 transactions were insider “testing” transfers where participants expected to receive nothing, and contending the amount involved was much smaller and largely consumed by transaction fees.
- Defendants also asserted there was no evidence the 32 participants saw or relied on the promotional materials, and contended any future public token would be a different token (BLVX), not BLV.
- After an ex parte TRO (including an asset freeze) and extensions, the court held a hearing and ruled on whether to enter a preliminary injunction.

## Issues

1. Whether the SEC showed a likelihood of success that the BLV-related transactions involved an “offer” or “sale” of a “security” as an investment contract under the Howey test.
2. Whether the SEC satisfied the requirements for preliminary injunctive relief, including likelihood of success and a reasonable likelihood of future violations.

## Decision

- The court denied the SEC’s motion for a preliminary injunction.
- The court concluded the SEC had not, on the then-existing record, shown a likelihood of success in proving the BLV transactions were securities transactions under Howey.
- The court found the evidence did not adequately establish that the 32 transfers reflected investments made with a reasonable expectation of profits from defendants’ efforts, rather than platform testing.
- The court treated the lack of evidence that the 32 participants had seen the alleged promotional claims as weakening the SEC’s expectation-of-profits showing.
- With an insufficient merits showing, the court declined to continue TRO-based relief and terminated or struck related filings.

## Legal Principles

- A preliminary injunction requires, among other things, a showing of likelihood of success on the merits; in SEC actions, courts also consider whether future violations are reasonably likely.
- Under Howey, an “investment contract” exists when there is (1) an investment of money, (2) in a common enterprise, (3) with a reasonable expectation of profits from the efforts of others.
- Whether token-related activity constitutes an investment contract is fact-dependent and may turn on evidence of what participants understood and whether they reasonably expected profits from the promoter’s managerial efforts.
- At the preliminary-injunction stage, unresolved factual disputes and an underdeveloped evidentiary record on key Howey elements can defeat injunctive relief.

## Conclusion

The court denied preliminary injunctive relief because the SEC had not shown, on the record presented, a likely ability to prove that the challenged BLV-related transactions were investment contracts under Howey, particularly given disputes that the early transfers were mere testing and the absence of evidence tying participants’ actions to profit-oriented marketing.


SEC v. Blockvest, LLC, 2018 WL 6181408 (S.D. Cal. 2018)