Crypto Fraud Defendants Challenge SEC’s Authority in $18M Lawsuit

The Securities and Exchange Commission (SEC) finds its jurisdiction challenged as two individuals accused of running a fraudulent $18 million cryptocurrency mining operation demand the dismissal of the regulator’s lawsuit. Wright Thurston and Kristoffer Krohn, together with the firm Green United LLC, have been indicted by the SEC for allegedly offering securities through deceptive means, according to the Сointelegraph.

Green United LLC, co-founded by Thurston and promoted contractually by Krohn, was accused of selling “Green Boxes” and “Green nodes” under the guise of miners for the GREEN token on a non-existent “Green Blockchain.” The SEC alleges these devices were essentially Bitcoin mining rigs, contrary to the marketing claims.

The defendants, in their motion to dismiss, argue that the SEC lacks authority over the digital asset ecosystem, suggesting Congress previously rejected such authority. They further criticise the SEC for being “unclear and inconsistent” in defining cryptocurrency.

They take a stance against the SEC’s approach, contending that the regulator has forsaken any attempt at proposing legislation or rulemaking, instead opting to “litigate its way to a coherent regulatory scheme.” Also claim the SEC failed to establish the Green Boxes as securities offerings or “investment contracts.”

This lawsuit, initiated in March by the SEC, comes as part of a larger debate over the regulatory control of cryptocurrency. SEC Chair Gary Gensler insists most cryptocurrencies, except Bitcoin, are securities under the Howey test, affirming the Commission’s authority over the sector.

The dispute highlights the ongoing challenges in defining and regulating digital assets. The outcome may set a significant precedent for cryptocurrency regulation and enforcement.