Ethereum (ETH)News

SEC Sues NAC Foundation LLC For Selling Unregistered Tokens

The US regulatory body issued another company allegedly committing similar crimes as the Ripple team, which SEC accused of selling unregistered securities to unsuspecting investors. The agency raised the claim in mid-2020 and sued its CEO, Rowland Marcus Andrade, for making the security available for sale despite not registering it under the Securities and Exchange Commission.

Apart from not being registered, the US body asserted that the token is an instrument for fraudulent activities. Still on the allegations, one of the judges who presided over the case opined that the US regulatory body’s claim is sufficient to raise an action against the CEO.

The sued firm had previously tried to dismiss the court case last year, claiming that the regulation is wrong while establishing that it did not need to register the token as a security. The executive said that the firm made customers understand that they could not guarantee returns on the purchase.

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SEC asserts that token offerings are securities

The body sidelined NAC’s explanation of customers expecting returns on their investment. The US regulatory body asserted that token offerings are securities even when the issuers claim they are not. The NAC foundations shared more information concerning its anti-laundering token.

They said it works with a public blockchain and helps infuse KYC requirements to prevent money laundering incidences, which is one of the significant reasons behind countries’ new regulations. According to the creators, the platform traces seemingly illegal transactions while still giving its customers privacy.

The tokens issued known as, ABTC, are not fully developed, and that was why the firm referred it to a pre-functional token which, AML will eventually replace when makers complete it. The firm said both tokens could be exchanged on crypto platforms and hinted that the tokens might give more investors returns.

How NAC violated US regulations

The firm had its first ICO through 2017-2018, with intentions to raise $100 million. Unfortunately, the firm did not increase its due amount because sales eventually accumulated $6 million from sales. Most token buyers were American, making the US market-dominant holders of the token, causing SEC to protect US citizens. SEC decided to apply to the Howey test to find out if the two offerings are indeed securities. The old test asks several questions to conclude whether or not the offerings act as security.

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The first question, which asks if the investment is something valuable. Since investors put in money to hold those tokens, then NAC’s token answers the first question. The second one concerns returns, and the accused company asserted the offerings are not securities since it warned against investors expecting returns from it.

Because of the innovative investment’s technicality, the court could not solely rely on an old law like Howey and considered joint enterprise and customers’ expectations concerning profits. SEC accused numerous firms concerning unregistered securities and the possibility of not doing it to defraud investors.

Adebayo Owotunse (Nigeria)

Adebayo Owotunse is a versatile writer who has written hundreds of crypto articles for dozens of agencies across the years. He is now also the newest addition to the Tokenhell writers team.

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