https://news.bloomberglaw.com/securities-law/crypto-mining-boxes-are-securities-court-says-in-sec-case"Green United disputed existence of security in dismissal bid
SEC adequately alleged investment contract, court says
Green United LLC failed to persuade a federal court to toss an SEC civil fraud suit against it on grounds that its cryptocurrency mining “box,” or hardware, customers didn’t enter into securities transactions with it.
The Securities and Exchange Commission “has sufficiently alleged a security in the form of Green Boxes (computer hardware) coupled with a hosting agreement to operate the Green Boxes,” Judge Ann Marie McIff Allen said for the US District Court for the District of Utah.
The inquiry is distinct from whether digital assets themselves—and transactions involving them—satisfy the test for investment contracts under the US Supreme Court’s 1946 opinion SEC v. W.J. Howey Co. and are therefore securities. The crypto industry has been litigating that issue in numerous cases.
The SEC says that Green United’s mining equipment and software didn’t actually mine digital tokens as promised to investors who entrusted $18 million to the company. Green United eventually purchased unmined tokens and distributed them to the investors’ accounts “to create the appearance of a successful mining operation,” the commission says.
Green United’s currency—called GREEN—"had no realizable value as it was not trading in a secondary market,” the SEC says.
The suit is among recent enforcement cases against crypto-related companies in which the agency has alleged outright fraud."
