SEC scores win in U.S. District Court against defunct Mass. crypto firm

SPRINGFIELD — A federal court judge is siding with the United States Securities and Exchange Commission in a battle with a cryptocurrency firm located in the Berkshire County town of Richmond.

The SEC won a judgment against Rivetz Corp. and its CEO, Steven Sprague, after suing the defunct company for selling $18 million worth of Rivetz tokens in 2017 to over 7,000 investors.

Representing himself, Sprague claimed the token in that “initial coin offering” was a software product and not an investment contract under the securities-defining Howey test, as the SEC alleged.

The Howey test sets criteria to make the distinction between the two investment categories.

The SEC sued Rivetz and Sprague in 2021, part of a move to crack down on the controversial cryptocurrency trend.

Crypto is a digital currency, such as Bitcoin, that is used as an alternative payment method or speculative investment.

In a Sept. 30 order, Judge Mark G. Mastroianni wrote that “from the first announcement of the ICO (initial coin offering) through its completion, Rivetz and Sprague made statements to potential purchasers that clearly tied the value of RvT tokens to Rivetz’s goal of creating a security ecosystem for mobile devices.”

The judge also said in his ruling that during the offering, Rivetz sold its tokens with few checks and balances.

“No restrictions were placed on sales related to other states and potential purchasers were not screened using ‘know your customer’ or anti-money laundering procedures,“ Mastroianni wrote in his ruling. ”Rivetz also did not file a registration statement prior to the ICO. During the Pre-Sale, the SEC issued an investigative report in which it cautioned that initial coin offerings and token sales might be subject to federal securities law.”

The order instructed the SEC to confer with Sprague and file a proposal for injunctive and monetary relief by Oct. 22.

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