SEC Files Lawsuit Against Nova Labs, Accusing the Firm of Offering Unregistered Crypto Securities

The United States Securities and Exchange Commission (SEC) filed a lawsuit against Nova Labs, accusing the firm of offering unregistered crypto securities.

The United States Securities and Exchange Commission (SEC) has filed a lawsuit against Nova Labs, a blockchain company behind the Helium Network. The SEC alleges that Nova Labs offered unregistered crypto securities, a claim that the firm has disputed in the past.

The SEC filed a complaint against Nova Labs in the District Court for the Northern District of California on Jan. 17, CoinChapter learned from the court documents. The SEC alleges that Nova Labs sold unregistered investment products. These include devices called “Hotspots” that can mine Helium cryptocurrency (HNT) and a program called “Discovery Mapping.”

The latter program reportedly allowed users to exchange their personal data for crypto rewards, which the SEC claims were part of an offering of securities. Nova Labs also allegedly made several misleading statements about its business partnerships.

Nova Labs Accused of Misleading Investors, Offering Unregistered Securities

According to the SEC, Nova Labs falsely promoted that companies like Lime, Nestlé, and Salesforce used or relied on the Helium Network. However, the SEC alleges that these companies did not engage with or depend on the network, as Nova Labs claimed.

The SEC also alleges that Nova Labs failed to register its offerings with the SEC and provided investors with inadequate material information about its business and the risks involved in its offerings.

Nova Labs has previously disputed the SEC’s characterization of its offerings as securities, arguing that they are instead functional devices and a decentralized wireless network service. The company has also highlighted the diverse use cases of the Helium Network, which include applications in logistics, agriculture, and smart cities.

SEC’s Broader Push Against Unregistered Crypto Securities

Under Gary Gensler’s leadership, the SEC has targeted several crypto firms for alleged violations, with the term “unregistered securities” being central to these cases.

In July 2023, Ripple Labs secured a partial legal win when a court ruled that XRP sales through exchanges did not qualify as unregistered securities. However, the SEC contested this decision, filing an appeal to challenge the ruling.

The agency’s enforcement actions have created a challenging environment for blockchain companies trying to navigate securities laws, especially with varying interpretations of what constitutes a security.

Possible Shift in SEC Enforcement After Leadership Change

With Gensler stepping down on Jan. 20, the SEC may change its approach under new leadership. A Jan. 15 Reuters report, citing unnamed sources, suggests the agency could review or freeze certain cases.

Specifically, cases involving allegations of securities law violations that do not include fraud might be paused. This development could impact the ongoing litigation against Nova Labs, which is accused of offering unregistered securities but not fraud.

The SEC’s enforcement actions and the broader legal battle over the classification of digital assets are expected to continue shaping the regulatory landscape for cryptocurrencies in the United States.