SEC Achieves Partial Victory Against Opporty International in ICO Case

SEC Wins Partial Victory Against Opporty International in ICO Case

In a significant ruling, the United States Securities and Exchange Commission (SEC) has achieved a partial victory in its ongoing legal battle against blockchain firm Opporty International and its owner, Sergii Grybniak. The lawsuit centers around allegations that Opporty conducted a fraudulent initial coin offering (ICO) by offering unregistered securities, violating federal securities laws.

Background on the Case

The legal action initiated by the SEC dates back to January 2021, when the agency accused Opporty and Grybniak of selling "unregistered digital asset securities" during their ICO. A memorandum published on September 24 revealed that U.S. District Judge Eric Komitee ruled the SEC had convincingly shown that the ICO involved unlawful sales of securities.

Key Findings of the Court

Judge Komitee's ruling confirmed that the tokens sold by Opporty, known as “OPP” tokens, constituted investment contracts under federal securities law. This classification necessitates that these tokens be registered with the SEC prior to their sale.

Additionally, the judge associated the ICO pre-sale with violations of Section 5 of the Securities Act of 1933, which governs the registration and distribution of securities. Throughout the proceedings, Grybniak argued against the necessity for registration, citing exemptions under Regulation D/S that apply to certain non-public offerings.

Grybniak's Defense and the Court's Response

While Grybniak's defense indicated that the sale of tokens did not require registration because it involved accredited investors and was conducted outside the U.S., Judge Komitee ultimately concluded that the defendants failed to satisfy the requirements of Regulation S. The court highlighted that directed selling efforts effectively connected the offering to the U.S. market.

Details of the Opporty ICO

The Opporty ICO, which took place from September 2017 to October 2018, reportedly garnered around $600,000 from nearly 200 investors. The SEC’s contention is that Opporty breached its regulations by not properly registering the sale.

Marketed as a “blockchain-based ecosystem for small businesses and their customers,” Opporty primarily targeted the U.S. market. The platform aimed to streamline the process for small businesses to list their services and enter agreements via smart contracts.

Conclusion and Implications

This ruling signifies a critical moment in the ongoing regulatory scrutiny faced by cryptocurrency firms, particularly those engaging in token sales. The SEC's subsequent handling of this case may set precedents for future ICOs and highlight the importance of compliance with U.S. securities laws.

For further information on securities regulations and ICO compliance, check out the following resources: