SEC Secures Legal Victory Against Rivetz Corp Over Unregistered ICO
The United States Securities and Exchange Commission (SEC) continues to assert its authority over initial coin offerings (ICOs), with its latest victory coming against Rivetz Corp and its CEO, Steven Sprague. On Sept. 30, a Massachusetts federal court ruled that Rivetz’s ICO involved the sale of unregistered securities, delivering another win to the SEC in its ongoing crackdown on ICO-related cases.
Rivetz ICO and the Howey Test
Federal court judge Mark Mastroianni sided with the SEC, ruling that Rivetz, through Sprague, had sold unregistered Ethereum-based tokens known as RvT to U.S. investors in 2017. The court found that these tokens met the criteria for securities as defined by the Howey test, a key legal framework that determines whether certain financial instruments qualify as securities.
Judge Mastroianni observed that although the tokens functioned as ERC-20 tokens, they did not possess any intrinsic value or utility during the ICO period. He clarified that the value of the RvT token was “directly linked to Rivetz’s business initiatives” and the future establishment of a security ecosystem for mobile devices, which is central to the Howey test’s requirement that investors expect profits based on the issuer’s actions.
The tokens were marketed as a key component of the planned Rivetz security ecosystem, with their value tied to future demand and usability — further solidifying their classification as securities.
Legal Consequences and Next Steps
The SEC had filed its lawsuit against Rivetz and Sprague in September 2021, alleging that the firm raised $18 million from over 7,200 investors worldwide, with a third of the investors based in the United States. Sprague, representing himself, argued that the RvT token was a software product, not an investment contract, but the court disagreed.
Judge Mastroianni emphasized that statements made during the ICO tied the value of RvT tokens to Rivetz’s goal of creating a secure ecosystem for mobile devices, effectively making the offering an investment scheme under U.S. securities laws.
The judge instructed the SEC to consult with Sprague and submit a proposal for injunctive and financial relief by October 22.
Part of a Broader Crackdown on ICOs
The Rivetz ruling comes just days after the SEC secured another partial win in its case against Opporty International. On Sept. 24, a New York federal court found that Opporty and its founder, Sergii Grybniak, had similarly sold unregistered securities during their $600,000 ICO in 2017 and 2018.
The SEC’s continued success in ICO-related cases demonstrates its determination to regulate the crypto industry, particularly where unregistered securities are concerned. The regulator has made it clear that it will not shy away from enforcing actions against companies that fail to comply with U.S. regulations and securities laws, especially when it comes to protecting investors from fraudulent or misleading ICOs.
Looking Forward
This ruling adds to the growing list of SEC victories as it works to establish legal precedent in the world of cryptocurrency. With several cases still pending, it is becoming increasingly evident that the regulator’s interpretation of ICOs as securities under the Howey test is gaining judicial support.
For crypto firms navigating the regulatory landscape, these rulings highlight the importance of ensuring that tokens do not meet the legal definition of a security, or else face significant legal and financial repercussions.
Sprague has not yet responded publicly to the ruling, but the SEC’s ongoing enforcement actions will likely prompt further scrutiny of ICOs and token offerings in the months to come.
I am Toby Rothschild, Co-Founder of Spearmint and author at Coinography, and a strategist focused on advancing Web3 innovation, digital ecosystems, and the future of decentralized technology. I combine product thinking, creative leadership, and deep interest in emerging trends to help shape how individuals and organizations interact with the next generation of digital systems.
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