Two individuals accused by the SEC of operating a fraudulent cryptocurrency mining scheme are requesting the dismissal of the lawsuit, contending that the regulatory agency lacks jurisdiction over cryptocurrencies.
Two individuals facing accusations from the United States securities regulator for orchestrating an $18 million fraudulent cryptocurrency mining scheme are requesting the dismissal of the lawsuit, contending in court that the agency lacks jurisdiction over cryptocurrencies.
Wright Thurston and Kristoffer Krohn have individually filed motions to dismiss a lawsuit brought against them by the Securities and Exchange Commission (SEC) on May 19.
The SEC had filed the lawsuit in March against the two individuals and Green United LLC, an alleged crypto mining and development firm. The defendants were accused of engaging in fraudulent activities by offering securities through the sale of “Green Boxes” and “Green nodes,” which were marketed as miners for the GREEN token on the “Green Blockchain.”
Green United LLC was established by Thurston, and Krohn was contractually involved in promoting the company.
In their arguments seeking the dismissal of the lawsuit, Thurston and Krohn asserted that the SEC lacks authority over the digital asset ecosystem. They further claimed that Congress had deliberated on the issue and rejected the SEC’s authority over cryptocurrencies.
Thurston and Krohn also criticized the SEC for being “vague and inconsistent” in its definition of cryptocurrencies. They echoed recent concerns that the regulator was engaging in a practice known as “regulation by enforcement,” suggesting that the SEC was using enforcement actions as a means of establishing regulatory guidelines rather than providing clear and transparent rules beforehand.
As part of their efforts to have the case dismissed, Thurston and Krohn put forth additional arguments asserting that the SEC has failed to prove that the Green Boxes constituted securities offerings or “investment contracts,” contrary to the regulator’s allegations stated in its complaint filed in March.
According to the SEC’s lawsuit filed in March, the regulatory agency alleged that the hardware sold by Green United, which was marketed as mining rigs for the GREEN token, were actually Bitcoin (BTC) mining rigs. However, these rigs did not function as advertised, and the purported blockchain associated with the scheme was non-existent.
Crypto Assets and SEC Claims
The SEC claimed that this alleged fraudulent scheme managed to raise approximately $18 million. Furthermore, the regulator stated that investors did not receive any of the Bitcoin (BTC) that was supposed to be mined by Green United as promised.
SEC Chair Gary Gensler has consistently maintained the Commission’s jurisdiction over cryptocurrencies, emphasizing that, in his view, the majority of crypto assets, excluding Bitcoin, qualify as securities based on the Howey test.