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1/🚨 The SEC just fought back in the Blockvest case and won big time. The issuers' Lawyers literally quit during the motion.
2/ It is *very* rare for a federal court to reconsider an order. Here, the SEC argued the court missed one of its arguments made the first time around. The court considered it this time, and found it persuasive.
3/ Remember, the first time around the SEC argued that it shouldn't have to prove both a security and a separate offer of the security. The court didn't buy it.
4/ Apparently the SEC made an alternative argument that there was separately a security, but the court overlooked it. Actually there *was* an offer of an investment of money: Blockvest's website had a big "BUY NOW" button on it!
5/ So apparently there was uncontroverted allegation that there was an "investment of money" after all. Prong one satisfied ✅
6/ Recall that the first time around, the SEC produced actual checks that said "blockvest" on them and that wasn't enough. The buy button did the trick though.
7/ The court further sided with the SEC that there was a common enterprise because the same website offered to pool the investors' funds and redistribute profits. Prong 2 satisfied ✅
8/ Finally, the website said that the investors would get "passive income" from the token. The court ruled this was sufficient for the final "expectation of profit" prong. ✅
9/ So, in the end, their website did them in. Strange that the court would have ignored this the first time around. But that's not the strangest thing...
10/ Blockvest used the SEC seal, claiming that the offering was approved by the Commission. It ALSO made up a fake federal agency called the Blockchain Exchange Commission (the BEC?) with a seal strikingly similar to the SEC's seal. Brazen.
11/ What you thought that was the strangest thing? No, in the immortal words of Val Kilmer as Doc Holiday, Blockvest had not even begun to defile itself...
12/ When it came time to file documents in the motion, Blockvest's lawyers refused to file what their clients gave them, citing Rule 11. US lawyers know instinctively what that means.
13/ You don't need to be a lawyer to read 11(b) here: law.cornell.edu/rules/frcp/rul…. The lawyers couldn't so certify, so they quit. OH WAIT YOU THOUGHT THAT WAS THE STRANGE PART?
14/ Blockvest, since they couldn't get their lawyer to sign them, went to court to try to file the documents themselves. The clerk wouldn't have it - rejected the documents.
15/ What a roller coaster. This case compressed an entire litigation's worth of drama into a single round of motion practice.
16/ Some important lessons: The court still required a common enterprise. The SEC has taken the position that a common enterprise is not necessary. It doesn't look like 9th circuit courts will accept this.
17/ The court still also required a independent showings of security status and then the offering of the security. It even undertook separate analyses for each.
18/ That precedent will likely persist. So will the precedent set today on each of these prongs.
19/ What do you think? Does this decision make sense? Was it weird that the court didn't consider these arguments the first time around?
20/ To me, this makes much more factual sense than the first order, even if the first order got the law right.
21/ Insert Bitmex rekt meme here plz.
