The promotor of Green United, accused of taking part in an $18 million crypto mining fraud scheme, is vying to appeal his case, arguing the Securities and Exchange Commission should be forced to drop the suit as its argument that he allegedly sold securities is wrong.
Kristoffer Krohn told a Utah federal court on Oct. 24 that the Tenth Circuit Appeals Court should decide if buyers of the firm’s equipment meant they joined a “common enterprise,” which the SEC used to allege the company sold investment contracts under securities laws.
“It would be far more efficient and in the interests of justice to have this legal issue presented to the Tenth Circuit and resolved now rather than require Krohn to bear the costs of litigation and trial first,” he wrote in his bid for interlocutory appeal.
Last month, Utah district court judge Ann Marie McIff Allen tossed a bid to dismiss the SEC’s lawsuit from Krohn, Green United, and its founder Wright Thurston, saying the SEC had “adequately alleged” that the firm’s “Green Boxes” were sold as unregistered securities.
A highlighted excerpt from Krohn’s appeal bid argues that the SEC’s application of the Howey test was incorrect. Source: PACER
The SEC has filed lawsuits against multiple crypto firms in the US, accusing them of selling unregistered securities under the Howey test, a legal test to determine if a transaction is a security.
The regulator sued Green United, Thurston and Krohn in March 2023, alleging they told “Green Box” buyers it would mine the GREEN token on the “Green Blockchain” but claimed none of that existed, and they instead bought rigs to mine Bitcoin (BTC) which investors didn’t receive.
“The SEC did not, and cannot, allege that Green Box purchasers had any right or stake in the profits of Green United’s business operations,” Krohn said in his appeal bid.
“The fact that Green Box purchasers were not offered the opportunity to share in Green United’s profits underscores that Krohn was simply selling high-powered computer hardware, not a security.”
He added the Tenth Circuit is yet to develop a “clear, binding law” over what an investment contract is in the context of crypto
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“While the order concluded that the SEC adequately alleged the existence of an investment contract under the facts pled in the amended complaint, reasonable judges might differ given the nascent stage of the technology involved in the instant case,” Krohn argued.
If successful, Krohn would then be allowed to argue his case before a three-judge appeals panel, a process which could take months before a final decision is handed down.
Krohn and Thurston had argued in dismissal motions last May that the SEC had no authority over crypto, claiming Congress “considered and rejected” the SEC’s authority over the space.
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