The U.S. Securities and Exchange Commission (SEC) has won a partial victory in its case against blockchain company Opporty International and its owners, accusing it of conducting a fraudulent initial coin offering (ICO).
On September 24, U.S. District Court Judge Eric Komitee said the SEC had proven that Opporty and its owner Sergii Grybniak illegally sold unregistered securities in the United States.
The SEC first announced legal action against Opporty and Grybniak in January 2021, accusing them of selling “unregistered digital asset securities” through an ICO.
Judge Komitee said that under the Howey test, the “OPP” tokens sold by Opporty and Grybniak in the ICO were investment contracts that needed to be registered with regulators.
Additionally, the SEC believes that Opporty and Grybniak’s ICO presale violated Section 5 of the Securities Act of 1933, which relates to the registration and distribution of securities.
Grybniak argued that its token sale did not need to be registered because it met the Reg D/S exemption for transactions that do not involve a public offering and the purchasers were accredited investors or the sales took place outside the United States.
The judge found that Grybniak had presented a reasonable defense against the SEC’s Section 5 charges, saying the SEC’s guidance on crypto offerings was “overly vague and arbitrary.”
But Judge Komitee agreed with the SEC, finding that Grybniak and Opporty failed to meet the requirements for an exemption from Regulation S because they “undisputedly engaged in ‘directed sales activities’ in the United States.”
Opporty’s ICO, which ran from September 2017 to October 2018, raised $600,000 from nearly 200 U.S. and overseas investors. The SEC said Opporty violated its rules by conducting an unregistered sale.
Opporty describes itself as a blockchain-based ecosystem for small businesses and their customers, primarily targeting the U.S. market. The platform is designed to allow small businesses to list their services and reach agreements through smart contracts.
