Key Points
- A U.S. court has declared that Green United’s crypto mining boxes are securities, supporting SEC allegations.
- Green United is accused of misleading investors and violating the Securities Act, raising $18 million in fraudulent transactions.
A federal court in the United States has ruled in favor of the Securities and Exchange Commission (SEC) against Green United, a crypto mining company. The court upheld the SEC’s claim that the mining boxes sold by the company are indeed securities.
Understanding the Fraud
The SEC filed a lawsuit against Utah-based Green United in March 2023, accusing the company of fraud. The company, which was allegedly selling fake assets worth $18 million, was charged with violating the Securities Act.
Green United, under the leadership of founder Wright Thurston and promoter Kristoffer Krohn, promised its clients a monthly income of up to 50% if they invested in their mining equipment, known as “Green Boxes”. The minimum investment was set at $3,000.
The SEC, however, concluded that the company was not involved in green mining as claimed. Instead, all client funds were directed towards mining Bitcoin (BTC) and the profits were pocketed by the company.
SEC’s Stance
The SEC maintained that Green United deceived its investors by selling devices with hosting agreements. Under these agreements, the company promised to manage Green Boxes for investors and promised them substantial profits. The U.S. District Court for the District of Utah, led by Judge Ann Marie McIff Allen, concurred with the SEC.
The SEC claimed that Green United failed to mine tokens with its hardware, despite making promises to its investors. Consequently, the company raised $18 million from individuals hoping to profit from crypto mining. Instead of fulfilling these promises, the company bought unmined tokens and deposited them in investors’ accounts, allegedly to give the illusion of a successful mining operation.
Green United, in response to the SEC’s allegations, claimed that no investors lost money and that the SEC’s allegations were unfounded. The company argued that the SEC was attempting to redefine the law by classifying hosted mining as a security, a practice they claim is common even among public companies.
SEC’s View on Cryptocurrencies as Securities
The SEC has also equated the sale of non-fungible tokens (NFTs) to transactions in unregistered securities. This was revealed during the indictment of the Impact Theory media company for selling NFTs as unregistered securities. The SEC has consistently claimed that all cryptocurrencies, with the exception of Bitcoin, should be considered as securities.
The SEC uses the Howey test to determine whether an asset qualifies as a security. This test takes into account factors such as initial sales and fundraising campaigns, ongoing promises of project development, and the use of social media to promote the features and benefits of its protocols.
However, the SEC has stated that it does not consider specific tokens as securities, but rather looks at the complete set of contracts, expectations, and agreements to sell the assets. This stance contradicts the views of SEC Chairman Gary Gensler, who believes that tokens are securities because the public expects profits from the activities of a group of developers.