If it looks like a security and acts like a security, then you probably sold investors a security. The SEC recently ruled that AML Bitcoin (ABTC) did not pass the Howey Test, therefore, the AML Bitcoin team’s lawsuit with the SEC over their unregistered securities sale will not be thrown out.
In June 2020, the SEC sued the NAC Foundation (the team behind AML Bitcoin), its Chief Executive Officer Marcus Andrade, and political lobbyist Jack Abramoff for conducting a fraudulent, unregistered securities offering. The AML Bitcoin team sold $5.4 million worth of ABTC tokens during an ICO in 2017 but claimed that they were not securities because they made investors aware that the tokens were not an investment and not to expect a return on that investment.
Abramoff pled guilty to the charges pressed against him, however, the project’s CEO Marcus Andrade pled not guilty. But since pleading not guilty, it has been an uphill battle for Andrade.
In November 2020, the judge in the United States of America vs. Rowland Marcus Andrade case denied Andrade’s motion to dismiss the case. More recently, on January 8th, the Judge denied another motion to dismiss the case, this time, putting the AML Bitcoin business through the Howey Test and determining that the $5.4 million ABTC token sale was indeed an unregistered securities offering.
“Howey and its progeny make clear that if it looks like a duck, quacks like a duck, and has the genetic makeup of a duck, it is, indeed, a duck. It matters not if the seller puts a sign on the bird exclaiming, ‘this is not a duck,’” said the SEC.
In particular, the SEC said that because ABTC investors put their money in a common enterprise and expected to profit from their investment that ABTC is a security.
Recently, the United States government has been keen to make a point out of companies like AML Bitcoin and Ripple who violated securities laws when they hosted their ICOs. Recently, CoinGeek took a deep dive into the Ethereum ICO and the roll-out of ETH 2.0 and why both do not pass the Howey test. At the moment, it seems like the US government is picking and choosing which projects it goes after. But at the end of the day, an unregistered securities sale is an unregistered securities sale, and if a digital currency project can not pass the Howey Test, it most likely won’t end well for that project.
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