On June 25, 2020, the US Securities and Exchange Commission filed a lawsuit in Northern California against NAC Foundation LLC, also known as the NationalAtenCoin Foundation, and Rowland Marcus Andrade, the company’s CEO, alleging that the company violated federal securities laws. sale An unregistered, pre-working version of the Bitcoin Anti-Money Laundering token known as AML BitCoin.
Unlike some other high-profile Howey test decisions, such as the SEC versus Telegram and SEC versus Kik, the NAC lawsuit contained detailed allegations of fraud before the sale of the token. The Justice Department accused Andrada of allegations of fraud related to the show, and Jack Abramoff, a member of the federal lobby group, pleaded guilty to participating in the fraud.
On January 8, 2021, Judge Richard Seaborg of Northern California rejected NAC and Andrade’s waiver request and found that the SEC complaint sufficiently argued that there had been an unregistered sale of securities during the Howey investment contract test. NAC filed a waiver again in October 2020, alleging default by the Securities and Exchange Commission (SEC), as well as filing lawsuits that Bitcoin AML tokens are not securities during the Howie test because they were told by buyers, among other things. time and time again that they can not rely on returns. The Securities and Exchange Commission responded colorfully, saying:
“If it looks like a duck and quacks like a duck and has the genetic makeup of a duck, then it really is a duck. It does not matter if the seller notices the bird and exclaims, “This is not a duck.”
While many of the facts about the NAC application are disputed, it seems that some issues have been resolved. In October 2017, NAC published a report to the Storting on AML BitCoin (AMLBit) and the business model on the website. In this message, NAC stated:
“AML BitCoin is based on a privately regulated public blockchain that promotes … recognizes customer compliance with money laundering and identifies criminals involved in illegal transactions, and maintains and improves the privacy of legitimate users.”
Whitepaper also emphasizes that the “privately regulated public blockchain” is not yet fully developed, and that the first buyers will issue “ABTC tokens” that can be exchanged for AML BitCoin tokens when the blockchain is completed. In all other respects, the ABTC tokens were earlier or non-functional.
Whitepaper said that both ABTC and AML BitCoin could end up being traded “on participating exchanges and trading floors”, acknowledging the potential for speculation through speculation. Most of the report to the Storting explains why, according to the NAC, AML bitcoins should not be a security.
The original coin was issued between October 2017 and February 2018, with some sales taking place before and after this period. While the report to the Storting states the goal of distributing 76 million ABTC tokens to the public to raise $ 100 million, the actual collection was about $ 5.6 million, mainly from 2,400 retail buyers in the United States. ABTC then traded on several online platforms, but NAC never tried to register tokens with the SEC.
Howey investment contract testing application
The Securities Act of 1933, which was passed during the Great Depression, clearly does not include cryptocurrencies or digital assets on the list of things to be regulated as money laundering. However, the Securities Act, which requires securities to be registered or exempted from registration in order to legally bid or sell, does not include “investment contracts” within the framework of the Securities Act. Crypto-assets are usually organized as securities if they meet the definition of an investment contract.
As for AML BitCoins and ABTC, it seems that both the SEC and the NAC agree that the correct test of whether the NAC sold an investment contract (and therefore a security) was the one set by the US Supreme Court in 1945 in the SEC against WJ . Howey Co. As described in more detail elsewhere, the Howey Test app raises the following questions:
Have your customers bought something of value?
Was it a joint venture?
Was the reason they invested in the expectation of profit?
Were the buyers dependent on the underlying management or contractor work of others?
All of these elements must be present to enter into an investment contract, even if the ninth district (where California is located) has folded the last two elements into one factor.