By Jude Ayua
The US Securities and Exchange Commission (SEC) has ruled that Green United’s crypto mining device, Green Box, is a security, Bloomberg Law reported. Meanwhile, the SEC’s lawsuit against Green United is still ongoing. The court determined if the SEC had adequately established that ‘Green Box’ is a security. Judge Ann Marie McLff Allen ruled that the SEC had successfully done so.
“Specifically, the Complaint alleges investors could invest $3,000 to receive a Green Box, which purportedly generated returns of ‘$100 each month,’ ‘a 40% to 50% return,’ or ‘100%+ ROIs’ by mining a cryptocurrency called ‘GREEN,’” Allen stated.
The consequence of this ruling is that Green United has violated the SEC’s regulations, by offering Green Boxes to the public without prior registration as a security. This is a different offense from the fraud case against the company.
The SEC’s Suit against Green United
In March 2023, the SEC charged Green United with allegations of an $18 million fraud scheme of selling unregistered crypto asset securities. The SEC also charged the company’s founder Wright W. Thurston and one of its promoters, Kristoffer A. Krohn, with the same offense.
“Green United’s currency—called GREEN—had no realizable value as it was not trading in a secondary market … Green United LLC’s cryptocurrency mining equipment and software didn’t actually mine digital tokens as promised to investors who entrusted $18 million to the company,” The SEC stated. Instead of Green Boxes mining crypto tokens, Green United purchased unmined tokens and deposited them to their investors’ accounts.
Green United challenged the suit but failed to convince the US District Court Judge contrary to the SEC’s position. “Green United intends to fight this case and win,” the company said, according to Bloomberg Law’s report.
Read also: eToro and US SEC settlement: Takeaways for digital assets operators.
What is the implication of the ruling on the crypto industry?
The classification of crypto mining devices as securities sets a significant precedent for similar cases in the future. Mining devices, which are hardware used for cryptocurrency creation, will potentially be subject to the US securities laws. This classification would require crypto companies to register their devices with the SEC before going public.
Notwithstanding the ruling, Green United’s case is unique, which means the ruling may not automatically apply to all crypto platforms that enable cryptocurrency mining. In Green United’s case, the company promised that its mining device was capable of creating tokens on its own without a user’s effort. Therefore, unless a crypto platform represents it to operate as such, it will not be subject to the ruling.
About the Author: Jude Ayua is a policy analyst at CAB. A lawyer, Jude is an associate at Infusion Lawyers where he is a member of the Blockchain & Virtual Assets Group. He is also a member of the Policy & Regulations Committee of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN). Jude reports and writes on crypto policy and regulations. jude@infusionlawyers.com
