The SEC charge Rivetz with the sale of illegal securities to over 7,200 investors in 2017.
ICO Proceeds were used to fund the firm’s business, give the founder a $1M bonus and buy him a house.
The US Securities and Exchange Commission (SEC) has charged Rivetz with an $18 million illegal securities offering. Founded in 2013, Rivetz leveraged blockchain technology to improve existing cybersecurity measures such as firewalls, passwords, and VPNs. The now-defunct company is accused of selling unregistered securities between July- Sept. 2017 to over 7,200 investors.
Per the regulator’s Sept. 8 complaint, the defendants are Rivetz Corp., founder Steven Sprague, and the firm’s subsidiary Rivetz International. The case focused on the ICO of the RvT token which Rivetz promoted and sold as an investment opportunity. Rivetz used proceeds to capitalize on its business by developing an app, ecosystem, and cyber security hardware.
SEC comes after Rivertz
Additionally, the defendants publicized the RvT tokens as “investments that purchasers could buy and sell on the secondary market.” The token, however, was “not operational” at the time of offering, the SEC claims.
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. 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.
During the initial sale, investors used Ether only to purchase RvT. After the sale was finalized, Rivetz and Sprague liquidated all received Ether through Rivetz International, the complaint reads. Other than funding the company’s operations, the funds that were used gave Sprague a $1 million bonus. They were also used to enable Sprague to get 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.”
Should the defendants be found guilty, the SEC is seeking injunctive relief. This means that rather than paying for wrongdoing with money, the defendants are to stop a specified act or behavior. The regulator also seeks the return of “ill-gotten gains,” prejudgment interest, and a civil penalty.
Mounting regulatory action
The SEC has been making headlines for its promised action against non-compliant crypto firms. On Sept. 2, the commission charged the infamous Ponzi-scheme BitConnect as an alleged unregistered securities offering valued at $2 billion. Reportedly, the agency was also investigating Uniswap decentralized exchange (DEX) over its marketing and investor services.
Coinbase has also not been spared. The exchange planned to launch a new stablecoin yield program soon. However, earlier this week, Coinbase CEO Brian Armstrong revealed that the SEC had threatened to sue them should they proceed.
One of the most prominent names in the blockchain industry, Erik Voorhees, questioned the regulator’s actions.
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?
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