SEC v. Blockvest, LLC

SEC v. Blockvest, LLC

Opinion

REPORT AND RECOMMENDATION FOR ORDER GRANTING PLAINTIFF'S MOTION FOR TERMINATING SANCTIONS [ECF No. 93]

Pending before the Court is Plaintiff's Securities and Exchange Commission's "Motion for Terminating Sanctions" [ECF No. 93], Defendants' Opposition [ECF No. 99], and Plaintiff's Reply in support of its motion for terminating sanction [ECF No. 102]. This Report and Recommendation is submitted to the United States District Judge Gonzalo P. Curiel pursuant to 28 U.S.C. § 636(b) and Civil Local Rule 72.1(c) of the United States District Court for the Southern District of California. For the reasons set forth below, the Court RECOMMENDS that Plaintiff's motion for terminating sanctions be GRANTED.

I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

On October 3, 2018, Plaintiff Securities and Exchange [*2]  Commission ("SEC") filed a Complaint against Defendants Blockvest, LLC ("Blockvest") and Reginald Buddy Ringgold, III a/k/a Rasool Abdul Rahim El ("Ringgold"). (Compl., ECF No. 1.) Plaintiff states that Defendant Blockvest, a limited liability company, and Defendant Ringgold, Blockvest's founder and principal, offer and sell unregistered securities in the form of digital assets called "BLVs," and seeks to stop investment fraud involving an initial coin offering ("ICO")¹ by Defendants. (See id.; see also id. at 2, 4-5.) The Complaint further alleges that Blockvest claims to be the "first [U.S.] licensed and regulated tokenized crypto currency exchange and index fund," that it has already raised more than $2.5 million in pre-ICO sales of its BLVs, and it will raise $100 million during its ICO to fund Blockvest's digital asset-related financial products and services. (Id. at 2.) Plaintiff contends that Defendants falsely claim that their ICO has been "registered" and "approved" by the SEC and other regulators, and that Defendants have partnered with and are audited by Deloitte Touche Tohmatsu Limited. (Id.) Plaintiff further alleges that Defendants created a fictitious regulatory agency, the Blockchain Exchange [*3]  Commission ("BEC"), in order to create legitimacy and an impression that their investment is safe. (Id.)

Plaintiff claims that Defendants do not have the required regulatory approvals and the established business relationships they claim to have, because the BLV offering is not "U.S. SEC approved," nor is it approved by any other U.S. financial regulator, the BEC is not affiliated with the SEC, and Blockvest is not affiliated with the name-brand companies whose logos appear in its marketing materials. (Id. at 2-3.) Plaintiff contends that investors' assets therefore lack the safety and protections that Defendants are falsely portraying in their scheme to raise money through Blockvest's planned ICO and ongoing pre-sales. (Id. at 3.)

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