In a recent decision, a Utah federal judge refused to dismiss a U.S. Securities and Exchange Commission (SEC) lawsuit against Kristoffer Krohn, a promoter implicated in an $18 million fraudulent cryptocurrency mining scheme. Judge Ann Marie McIff Allen’s ruling on November 26 upheld her earlier decision from September 23, allowing the SEC’s lawsuit against Green United LLC to proceed.
The SEC alleges that from April 2018 to December 2022, executives at Green United engaged in deceptive practices by marketing and selling “Green Boxes” and “Green Nodes.” These devices were purported to mine Bitcoin and generate substantial returns for investors through the development of a so-called Green Blockchain and the appreciation of the GREEN token.
Investors were reportedly misled to believe that their investments in the hardware would contribute to the development of a new blockchain technology that would increase the value of the GREEN token significantly. However, the SEC contends that the Green Blockchain never existed and that the GREEN token was only created after the initial sales of hardware to create a facade of legitimacy and success.
Judge’s Ruling and Arguments
Judge Allen dismissed Krohn’s appeal for lack of substantial grounds. Krohn had argued that the SEC failed to prove the Green Boxes were investment contracts under the Howey test—a legal benchmark for defining securities. He also accused the SEC of misinterpreting elements of this test. However, Judge Allen noted that Krohn’s arguments lacked legal substantiation and that he failed to provide credible evidence that any court has recognized his definitions or arguments.
The Howey test, which comes from a 1946 Supreme Court case, determines what constitutes an investment contract, or security. It considers:
- An investment of money
- In a common enterprise
- With the expectation of profit
- To be derived from the efforts of others
Judge Allen’s ruling emphasized that Krohn could not demonstrate any significant legal debate over the application of this test to the facts of the case presented by the SEC.
Additionally, Wright Thurston, founder of Green United, has also filed a motion to dismiss the SEC’s charges against him, indicating ongoing legal battles in this complex case.
| Element | Description |
|---|---|
| Alleged Scheme Period | April 2018 – December 2022 |
| Amount Involved | $18 million |
| Products Offered | Green Boxes and Green Nodes |
| Alleged False Claims | Development of Green Blockchain and value increase of GREEN token |
| Legal Basis for Action | Violation of securities laws as per Howey test |
The ongoing lawsuit against Green United and its executives underscores the critical need for robust regulatory oversight in the burgeoning field of cryptocurrency. As the market continues to evolve, the allure of high returns can often obscure the inherent risks associated with these investments. It is imperative for regulatory bodies like the SEC to maintain vigilance and enforce the law to protect investors from fraudulent schemes. This case serves as a cautionary tale that emphasizes the importance of transparency, accountability, and the adherence to established legal frameworks within the crypto industry. Investors are reminded to exercise due diligence and skepticism when evaluating investment opportunities, especially those promising unusually high returns.
Featured image credit: KATRIN BOLOVTSOVA via Flickr
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