The United States Securities and Exchange Commission (SEC) has achieved a significant milestone in its ongoing legal battle with blockchain firm Opporty International and its owner, Sergii Grybniak, who are accused of conducting a fraudulent initial coin offering (ICO).
In a memorandum issued on September 24, U.S. District Judge Eric Komitee ruled that the SEC had sufficiently demonstrated its claims that Opporty and Grybniak unlawfully offered unregistered securities for sale in the United States. This legal action, initiated by the SEC in January 2021, centers around allegations that Opporty conducted a fraudulent ICO by selling “unregistered digital asset securities.”
Judge Komitee affirmed that the “OPP” tokens sold during the ICO qualified as investment contracts under federal securities laws, necessitating registration with the SEC, as determined by the Howey test. The SEC argued that Opporty’s pre-sale contravened Section 5 of the Securities Act of 1933, which governs the registration and distribution of securities.
Throughout the proceedings, Grybniak contended that the token sale fell under Regulation D/S exemptions, which are applicable when transactions are not public offerings and involve accredited investors or sales outside the U.S. However, the judge noted that Grybniak presented a credible defense regarding the SEC’s Section 5 claim, highlighting the agency’s guidance on crypto offerings as “vague and arbitrary.”
Despite this, Judge Komitee concurred with the SEC’s assertion that Grybniak and Opporty did not meet the exemption requirements of Regulation S, citing their “directed selling efforts” in the U.S. as a significant factor.
The Opporty ICO, which took place from September 2017 to October 2018, reportedly raised $600,000 from nearly 200 investors globally. The SEC maintains that Opporty violated its regulations by failing to register the token sale.
Opporty marketed itself as a blockchain-based ecosystem designed to support small businesses and their customers, facilitating service listings and agreements through smart contracts. The case underscores ongoing regulatory scrutiny in the cryptocurrency space as authorities seek to enforce compliance with existing securities laws.
