Source: https://www.docketalarm.com/cases/California_Southern_District_Court/3--18-cv-02287/Securities_and_Exchange_Commission_v._Blockvest_LLC_et_al/1/
Timestamp: 2020-08-08 18:44:34
Document Index: 97777148

Matched Legal Cases: ['§ 77', '§ 78', '§ 77', '§ 78', '§ 230', '§ 230', '§ 77']

Securities and Exchange Commission v. Blockvest, LLC et al, 3:18-cv-02287, No. 1 (S.D.Cal. Oct. 3, 2018)
Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.1 Page 1 of 30
`AMY J. LONGO (Cal. Bar No. 198304)
`Email: longoa(al,sec.gov
`DAVIDS. BROWN lCal. Bar No. 134569)
`Email: browndav(al,sec.gov
`BRENT W. WILNER (Cal. Bar No. 230093)
`Email: wilnerb@sec.gov
`4 Attorneys for Plaintiff
`Securities and Exchange Commission
`Robert A. Cohen, Unit Chief (Cyber Unit)
`Headquarters
`100 "F" Street N.E.
`7 Washington, District of Columbia 20549
`·ORIGINAL
`/ ocr. _ 3 ,.IBJ
`CLERK US DISTRICT COURT
`~~UTHERN DISTRICT OF CALIFORNIA
`8 Michele Wein Layne, Regional Director
`John W. Berry, Associate Regional Director
`9 Amy J. Longo, Regional Trial Counsel
`444 S. Flower Street, Suite 900
`California 90071
`10 Los Angeles
`Telephone: 323) 965-3998
`11 Facsimile: ( 13) 443-1904
`SOUTHERN DISTRICT OF CA~IFO~~A '·· ...... _ .. .
`t~:. " ii
`SECURITIES AND EXCHANGE
`'18 CV 2 2 8 7 GPC BLM
`corPLAINI .
`_ . .
`(FILED UNDER SEAL)
`BLOCKVEST, LLC and REGINALD
`BUDDY RINGGOLD, III a/k/a RASOOL
`ABDUL RAHIM EL,
`.. , .. :' •:'. \'
`Plaintiff Securities and Exchange Commission ("SEC") a1lege~:
`.,. ,. '
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`\'•'
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`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.2 Page 2 of 30
`(~)
`Plaintiff Securities and Exchange Commission ("SEC") brings this
`3 emergency action to halt an ongoing investment fraud involving an upcoming initial
`4 coin offering ("ICO") by defendant Block.vest LLC ("Blockvest") and its founder and
`5 principal, Reginald Buddy Ringgold, III, aka Rasool Abdul Rahim El ("Ringgold").
`6 Block.vest, which purports to be the "first [U.S.] licensed and regulated tokenized
`7 crypto currency exchange and index fund" (emphasis added), claims that it has
`8 already raised more than $2.5 million in pre-I CO sales of its BL V digital tokens
`("BL Vs"), and that it will raise $100 million during its ICO, purportedly to fund
`10 Block.vest's digital asset-related financial products and services.
`Blockvest and Ringgold claim their ICO has been "registered" and
`"approved" by the SEC and other regulators, even going so far as to use the SEC's
`seal to promote their offering. None of that is true: the SEC has in no way approved,
`14 authorized or otherwise endorsed defendants, their entities, nor their ICO.
`15 Defendants also claim they are "partnered" with and "audited by" Deloitte Touche
`16 Tohmatsu Limited ("Deloitte")-which they are not.
`To carry out this scheme, Ringgold created a fictitious regulatory
`18 agency, the "Blockchain Exchange Commission," or "BEC," which he claims
`"regulates" the "Blockchain Digital Asset Space," supposedly to "protect" digital
`20 asset investors. But the BEC is not a regulator at all. It falsely conjures similarities
`to the SEC: its logo is similar to the SEC's; its mission statement is cribbed from the
`22 SEC's own; and its offices share the same address as SEC headquarters. The
`23 Block.vest website links directly from the BEC seal to the SEC's website. Ringgold
`24 promotes the Blockvest offering and the BEC side-by-side, further conveying a false
`25 veneer of legitimacy to the Blockvest ICO.
`In reality, defendants have neither the regulatory "approvals," nor the
`27 established business relationships they claim. The BL V offering is not "U.S. SEC
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.3 Page 3 of 30
`1 approved," nor approved by any other U.S. financial regulator. The BEC has no
`2 affiliation with the SEC, and Blockvest is not affiliated with the name-brand
`3 companies whose logos appear in its marketing materials. Investors' assets therefore
`lack the safety or protections that defendants are falsely portraying in their ongoing
`scheme to raise money through Blockvest's planned ICO and ongoing pre-sales.
`Unless restrained and enjoined, Ringgold is scheduled to appear at
`two "VCs, Angels, Crypto and ICOs" events in Los Angeles on October 9, 2018
`8 and in Orange County on October 11, 2018, where he will likely continue
`9 promoting Blockvest and the BEC in order to raise additional monies from
`investors through his fraudulent misrepresentations and scheme to defraud-
`including for Blockvest's intended December 2018 ICO.
`By lying to investors and perpetrating a fraudulent scheme through the
`13 Blockvest ICO, each of the defendants is violating the antifraud provisions of
`14 Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section lO(b) of
`the Securities Exchange Act of 1934 ("Exchange Act") and Rule lOb-5 thereunder,
`16 as well as the securities offering registration provisions of Section 5 of the
`1 7 Securities Act.
`The SEC seeks orders temporarily, preliminarily and permanently
`enjoining defendants from violating the securities laws; an order temporarily,
`20 preliminarily and permanently enjoining Ringgold from participating in an offering
`21 of digital or other securities or making misrepresentations regarding regulatory
`approval in connection with such offerings; orders freezing defendants' assets;
`requiring accountings from defendants; and prohibiting the destruction of
`24 documents; as well as disgorgement of defendants' ill-gotten gains and civil
`25 monetary penalties against defendants.
`The Court has jurisdiction over this action pursuant to Sections 20(b ),
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.4 Page 4 of 30
`(!
`1 20(d)(l), and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d)(l), and
`2 77v(a), and Sections 21(d)(l), 21(d)(3)(A), 21(e), and 27(a) of the Exchange Act,
`15 U.S.C. §§ 78u(d)(l), 78u(d)(3)(A), 78u(e), and 78aa(a).
`Defendants have, directly or indirectly, made use of the means or
`instrumentalities of interstate commerce, of the mails, or of the facilities of a
`6 national securities exchange in connection with the transactions, acts, practices,
`7 and courses of business alleged in this complaint.
`10. Venue is proper in this district pursuant to Section 22(a) of the
`9 Securities Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15
`10 U.S.C. § 78aa(a), because certain of the transactions, acts, practices, and courses of
`conduct constituting violations of the federal securities laws occurred within this
`12 district. In addition, venue is proper in this district because defendant Ringgold
`resides in this district and defendant Blockvest has its principal place of business in
`11. Blockvest LLC was formed in Wyoming in April 2018 and is based
`in San Diego. It is a private company that purports to provide various digital asset-
`related financial products and services, for which it is raising funds through the
`sale of BL Vs. Blockvest uses the website www.blockvestico.io. Blockvest is not
`20 and has never been registered with the SEC in any capacity. Blockvest registered
`as a Commodity Trading Advisor ("CTA") with the Commodity Futures Trading
`22 Commission ("CFTC") on July 24, 2018.
`12. Reginald Buddy Ringgold, III, aka Rasool Abdul Rahim El, age
`24 34, is a resident of San Diego. Ringgold is a self-described "Financial Markets
`Investment Coach" and "professor," who claims to have over 17 years of
`26 experience in the financial industry as an investment adviser, trader, and
`investment banker. Ringgold claims to be the founder ofBlockvest. He is listed as
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.5 Page 5 of 30
`the executive officer and sole related person ofBlockvest in a Form D filed with
`the SEC for the BL V offering (claiming exemption from SEC securities offering
`registration requirements), which he signed. He also holds himself out, in his
`4 online biographies and in his Linkedln profile, as the principal of various affiliated
`5 entities including the BBC, Blockchain Investment Group LLC ("BIG"), Rosegold
`Investments LLP ("Rosegold"), and Master Investment Group, Inc. ("MIG"),
`7 which are referenced as providing services for Blockvest or otherwise featured as
`8 partners on Blockvest' s website and whitepaper. Since at least 2010, Ringgold has
`9 used the alias Rasool Abdul Rahim El in connection with, among other things,
`10 opening accounts at several financial institutions. Ringgold uses the website
`11 www.reginaldringgold.com. Ringgold has never been registered with the SEC or
`the CFTC in any capacity under either his name or his alias, nor has he been
`associated with any registered firms in the securities industry.
`RELATED ENTITES
`13. The Blockchain Exchange Commission, LLC was formed in
`16 Wyoming and is based in San Diego. Ringgold claims to be the founding member
`17 of the BEC. The BBC is a private company that purports to be a regulatory
`18 organization which, among other things, oversees digital asset trading platforms
`19 and ICOs. The company was originally formed as Fartlife LLC in January 2015,
`20 changed its name to Smartlife in 2017, then changed its name to the BEC in May
`21 2018. The BEC uses the website www.blockchainexchangecommission.org. The
`22 BBC is not registered with the SEC or the CFTC in any capacity.
`14. Blockchain Investment Group LLC was formed in Wyoming in
`24 March 2018 and is based in San Diego. A limited liability partnership with a
`similar name ("Blockchain Investment Group LLP") was formed at or around the
`same time. Ringgold claims to be the founding partner of BIG (and the related
`27 LLP). BIG is a private company that purports to provide investment banking
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.6 Page 6 of 30
`1 services to blockchain-related companies. It also purports to manage Blockvest's
`2 planned digital asset fund and is listed as a principal ofBlockvest with the CFTC.
`3 BIG uses the website www.blockchaininvestmentgrp.com. BIG is registered with
`the Financial Crimes Enforcement Network as a money service business. Neither
`5 BIG nor the related LLP is registered with the SEC or the CFTC in any capacity.
`15. Rosegold Investments LLP, aka Rosegold Investments Trust, was
`formed in Delaware in April 2017 and is based in San Diego. Ringgold claims to
`8 be Rosegold's founder, managing partner, and chief investment officer. At times,
`9 Ringgold also describes Rosegold as a California trust. Rosegold purports to
`10 provide investment banking and advisory services. Rosegold uses the website
`11 www.rosegoldinvestments.com. Neither Rosegold nor the related trust is
`registered with the SEC or CFTC in any capacity.
`16. Master Investment Group, Inc. was formed in California in
`14 March 2017 and is based in San Diego. Ringgold claims to be MIG's founder and
`15 managing partner. MIG purports to provide portfolio management services. MIG
`16 uses the website www.masterinvestmentllp.com. MIG is not registered with the
`17 SEC or the CFTC in any capacity.
`17. Ringgold is not listed on the company formation or incorporation
`19 documents for the BEC, BIG, Rosegold, or MIG, but these entities share common
`20 personnel and common addresses connecting the entities to Ringgold. Blockvest's
`21 CFO is listed on company documents as the CEO of MIG and the CFO of BIG,
`22 and another one ofRinggold's associates is listed as both the Assistant Secretary of
`the BEC and as the CFO of MIG. The BEC, MIG, BIG, and Rosegold all use a
`24 San Diego address that Blockvest and Ringgold also use: 5694 Mission Center
`25 Road, Suite 489, San Diego, CA-which is a UPS store.
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.7 Page 7 of 30
`Background on Initial Coin Offerings
`18. An initial coin offering or "ICO" is a fundraising event in which an
`4 entity offers participants a unique "coin" or "token" or "digital asset," in exchange
`for consideration, often in the form of virtual currency-most commonly Bitcoin
`6 and Ether-or fiat currency.
`19. The digital assets are issued on a "blockchain" or cryptographically
`8 secured ledger.
`20. A blockchain is a type of distributed ledger, or peer-to-peer database
`spread across a network, that records all transactions in the network in theoretically
`11 unchangeable, digitally-recorded data packages called blocks. Each block contains
`12 a batch of records of transactions, including a timestamp and a reference to the
`13 previous block, linking the blocks together in a chain. The system relies on
`14 cryptographic techniques for secure recording of transactions. A blockchain can
`15 be shared and accessed by anyone with appropriate permissions. The Bitcoin
`16 blockchain is an example of a "non-permissioned," or public and open access
`17 blockchain. Anyone can download the Bitcoin open-source software and join. All
`18 participants share a single view of the Bitcoin blockchain, which is updated when
`19 Bitcoin network participants reach a consensus on the validity of transactions
`20 under review. "Permissioned" or private blockchains are modifications to that
`21 model and require permissioned servers to be approved to participate on the
`22 network or to access particular information on the blockchain. Blockchains or
`23 distributed ledgers can also record what are called smart contracts, which
`24 essentially are computer programs designed to execute the terms of a contract
`25 when certain triggering conditions are met.
`21. Generally, digital assets issued in an ICO entitle holders to certain
`rights related to a venture underlying the ICO, such as rights to profits, shares of
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.8 Page 8 of 30
`1 assets, rights to use certain services provided by the issuer, and/or voting
`rights. These digital assets may also be listed on online platforms, often called
`3 virtual currency exchanges, and tradeable for virtual or fiat currencies. Often, the
`4 digital assets are immediately tradeable.
`ICOs are typically announced and promoted through public online
`6 channels. Issuers usually release a "whitepaper" describing the offering and the
`terms of the ICO. To participate, investors are generally required to transfer funds
`(often virtual currency) to the issuer's address, online wallet, or other
`9 account. After the completion of the ICO, the issuer distributes its unique digital
`10 assets, commonly known as "tokens," to the participants' unique addresses on the
`11 blockchain.
`23. On July 25, 2017, the SEC issued a Report of Investigation pursuant
`to Section 21(a) of the Exchange Act that put the digital-asset industry on notice
`that many digital assets are securities and subject to the federal securities laws and
`the registration requirements, regardless of whether the issuing entity is a
`traditional company or a distributed ledger or blockchain-enabled means of capital
`raising, regardless of whether the securities are purchased with U.S. dollars or
`18 virtual currencies, and regardless of whether the securities are distributed in
`19 certificated form or through distributed ledger technology.
`The Blockvest Pre-Sales and ICO
`Blockvest's purported business
`24. Blockvest purports to be a financial services company that, using
`23 blockchain technology, "aims to solve one of the biggest problems in the
`24 cryptocurrency industry-volatility" as well as the "problems of trust and
`custodianship."
`In or around February 2018, Blockvest issued a whitepaper, available
`27 on its webpage, for the sale of BL Vs, which purport to be digital assets issued
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.9 Page 9 of 30
`pursuant to a smart contract developed using the Ethereum Blockchain.
`26. According to the whitepaper and the Blockvest website, Blockvest is
`developing four products, which will be funded by its planned ICO:
`a. "Blockvest30": purportedly a cryptocurrency index fund managed
`by BIG, using a "proprietary trading strategy for trading all asset
`classes·"
`b. "Yields": purportedly a digital currency described as a
`"stablecoin," supposedly linked to the U.S. dollar, and also
`described as a "digidend;"
`c. The "Blockvest Interface": purportedly an automated "investment
`portfolio structuring and management" tool; and
`d. The "Blockvest Decentralized Exchange" or "DEX": purportedly
`"a Bloomberg for crypto economics" on which BL V holders will
`have the ability to track digital asset prices, follow market news,
`and acquire and sell digital assets through other "major
`cryptocurrency exchanges."
`27. Based on Blockvest's website, none of the foregoing products are yet
`operational; Blockvest showed a demo version of the DEX at an August 2018
`digital assets conference.
`28. Blockvest's website and whitepaper reflect that it will receive certain
`services from BIG, Rosegold, and MIG.
`Defendants' promotions and sales of the BL Vs
`29. Blockvest first issued BL Vs, priced at $1 per token, in a transfer dated
`March 30, 2018.
`Since March 30, 2018, Blockvest has been conducting BLV sales in
`two tranches: (1) a "private sale" with a 50o/o bonus that ran through April 30,
`27 2018; and (2) an ongoing "pre-ICO" or "Testing the Waters Phase" with a 20%
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.10 Page 10 of 30
`1 bonus from July 1, 2018 through October 6, 2018. These sales lead up to a "global
`ICO" that is planned for December 1, 2018.
`31. Between early 2018 and the present, Blockvest also has conducted
`several "bounty programs," giving BL Vs in exchange for favorable social media
`5 posts concerning the company, which have been advertised on Blockvest's social
`6 media accounts.
`32. According to Blockvest's website and whitepaper, Blockvest has
`8 capped the supply of BL Vs at 100 million, with plans to issue 50 million of the
`tokens during the pre-ICO and ICO.
`33. Also according to the website and whitepaper, the company will issue
`11 32.5 million of the tokens to investors, setting aside 10 million for management, 5
`12 million for "Core Activities Reserves," and 2.5 million for promotional incentives.
`34. The company also claims on its website and whitepaper that it is
`14 planning an initial public offering, or IPO, (separate from the ICO) of unspecified
`securities in 2019.
`Since early 2018, Blockvest has been promoting its pre-ICO and ICO
`through Blockvest's whitepaper, the websites for Blockvest, BIG, and Ringgold,
`18 and social media accounts held by Blockvest and Ringgold.
`36. Also since early 2018, Ringgold has been appearing at various
`20 blockchain conferences to tout Blockvest, and posting videos of these appearances
`21 online.
`37. On or about May 8, 2018, Blockvest claimed on social media
`channels to have raised $2.5 million through the sale of BL Vs, within seven days
`24 of the commencement of the pre-ICO sales.
`38. By on or about September 17, 2018, Blockvest represented on its
`26 website that it had sold 18% of the BL Vs being offered, or roughly 9 million
`tokens.
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.11 Page 11 of 30
`39. Ethereum Blockchain data reflects that between March 30 and
`2 September 26, 2018, Blockvest issued over 10 million tokens in 266 transfers.
`Blockvest's and Ringgold's concessions that BL Vs are
`securities
`40. Blockvest's Form D filing with the SEC, its promotional materials,
`6 and Ringgold's public statements reflect defendants' understanding that BL Vs are
`securities.
`41. Under Section 5 of the Securities Act, any offer or sale of a security
`9 must either be registered with the SEC or meet an exemption. Securities Act
`10 Regulation D [17 C.F.R. §§ 230.500 et seq.] provides a number of exemptions
`from the registration requirements, allowing some companies to offer and sell their
`securities without having to register the offering with the SEC.
`42. When relying on such an exemption, companies must file what is
`14 known as a "Form D" after they first sell their securities. Form Dis a brief notice
`that includes basic information about the company and the offering.
`43. One of the exemptions provided for in Regulation D, Rule 506(c),
`17 provides that a company can broadly solicit and generally advertise the offering
`and still be deemed to be in compliance with the exemption's requirements if: (1)
`the investors in the offering are all accredited investors; and (2) the company takes
`reasonable steps to verify that the investors are accredited investors.
`44. On April 16, 2018, Blockvest filed a Form D for a $100 million dollar
`securities offering of BL Vs, claiming an exemption from registration under
`23 Securities Act Regulation D, Rule 506( c ).
`45. On information and belief, Blockvest does not take reasonable steps to
`ensure that BL V investors are accredited.
`46. Although Blockvest filed a Form D with the SEC for a Regulation D
`registration exemption, its website instead invokes Securities Act Regulation A.
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.12 Page 12 of 30
`SEC Regulation A [17 C.F.R. §§ 230.251 et seq.] constitutes an
`2 exemption from Section 5 registration and is limited to eligible issuers as defined
`in the regulation. On March 25, 2015, the SEC amended Regulation A pursuant to
`4 Section 401 of the Jumpstart Our Business Startups (JOBS) Act of2012 [15 U.S.C.
`5 § 77c(b)(2)-(5)). Section 401 directed the SEC to adopt rules expanding the
`6 previous Regulation A by, among other things, exempting public offerings of up to
`7 $50 million annually (Regulation A, as amended, is commonly known as
`8 "Regulation A+").
`48. Under Regulation A, issuers must comply with different regulatory
`requirements depending on whether the offering is a Tier 1 offering for up to $20
`11 million in proceeds or a Tier 2 offering for up to $50 million. In either case, no sale
`12 of a security may occur under Regulation A until ( 1) the issuer has filed an offering
`statement on Form 1-A with the Commission and (2) the Commission has issued a
`14 notice of qualification.
`49. Block.vest's website states (falsely) that "[t]he company is now SEC
`16 Reg A+ compliant and can offer their securities offering to Unaccredited
`Investors all over the globe." (Emphasis added.)
`50. Likewise, on or about June 23, 2018, Ringgold claimed during a
`19 presentation at the "Blockchain Economic Forum" ("BE Forum"), a video of
`20 which he posted online, "Since we got our Reg A, we are able to take on investors
`from pretty much everywhere for any amount. They don't have to be accredited."
`(Emphasis added.)
`51. Blockvest has not filed a Form 1-A offering statement for a
`24 Regulation A securities offering, nor has any offering been qualified by SEC staff
`as required by Regulation A.
`52. On or about July 29, 2018, Ringgold stated during a presentation at
`the "Digital Currency Con" ("DC Con"), a video of which he posted online: "The
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.13 Page 13 of 30
`1 SEC says it's a security so we registered with the SEC."
`Representations regarding expected profits and income
`from the efforts of Blockvest, BIG, and their management
`53. Blockvest's whitepaper and online materials represent that the
`5 Blockvest30 and other Blockvest products and services will provide returns based
`6 on the purported skill ofBlockvest's and BIG's management.
`For example, Blockvest's website and other online materials highlight
`the supposed decades of financial industry experience of a 21-person management
`In particular, the posted biography for "Prof. Ringgold" claims he
`"[ o ]verses all aspects of operations and important strategic decisions for [BIG]."
`56. Blockvest's Facebook page claims Ringgold has "over 17+ years of
`experience in the financial markets and has been a full-time financial trader for
`several years trading the European, US and Asian markets." (The post does not
`allude to Ringgold's age, which is 34).
`57. Blockvest's whitepaper emphasizes BIG's "proprietary trading
`strategy" as the driver of steady profits for the Blockvest30, and states that
`"Blockchain Investments targets returns between 12% to 25% per annum."
`58. Blockvest' s online materials also promise that BL V holders will share
`in the profits of the Blockvest30 and other ventures.
`For example, Blockvest's whitepaper states, "As a Blockvest token
`22 holder, your Blockvest will generate a pro-rated share of50% of the profit
`23 generated quarterly as well as fees for processing transactions."
`60. The whitepaper also states that, "The BL V token is a novel
`25 decentralized asset, whose intrinsic value is derived from the fees generated in the
`26 network it collateralizes as well as the right to receive quarterly earnings from the
`27 performance of the Blockchain Investments Fund."
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.14 Page 14 of 30
`61. Blockvest's website states that "[s]imilar to a mutual fund, BlockVest
`[sic] is a closed-end hybrid fund with a profit-sharing smart contract that pays
`3 quarterly digital dividends."
`62. Next to the logo for Vanguard Investments ("Vanguard"), which was
`5 used without the knowledge or permission of Vanguard, Blockvest's website states
`that, "Similar to a mutual fund[,] Blockvest is a closed-end hybrid fund with a
`7 profit-sharing smart contract that pays quarterly digital dividends."
`63. Further, Blockvest' s promotional materials state that BL V investors
`9 will earn "passive" income simply by holding their BL Vs in Blockvest's digital
`10 wallets, referred to as "Investomodes" or "Nvestnodes."
`For example, Blockvest's website states: "Blockvest Nvestnodes
`12 generate passive income through asset backed profit sharing smart contracts ....
`13 The company is proud to introduce the Token-As-Fund business model, which
`14 allows investors to subscribe to the fund's income stream."
`65. According to the Blockvest website, "Simply holding 1000 BL V in an
`16 Nvestnode generates passive income thru [sic] fees."
`c. Defendants' Material Misrepresentations and Omissions
`False claims regarding regulatory approvals
`66. Blockvest and Ringgold are falsely representing to investors that
`20 Blockvest, the ICO, the Blockvest30, and/or the Blockvest DEX, have obtained·
`regulatory "approval," most notably misleading potential investors that Blockvest
`22 and its ICO are "approved" by the SEC.
`67. A reasonable investor in the Blockvest offering would consider
`important the truth about the regulatory and registration status ofBlockvest, its
`affiliates, and its ICO.
`False claims regarding SEC "approval"
`Since the Blockvest whitepaper was issued in February 2018 and
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.15 Page 15 of 30
`1 continuing through the present, Blockvest and Ringgold have falsely stated on
`2 numerous instances that Blockvest, its planned products, or the ICO are
`3 "approved" by the SEC.
`69. Blockvest's whitepaper describes its ICO as an "SEC Reg A+
`5 Securities Offering Approved." (Emphasis added.)
`70. Blockvest's website falsely states that: "Blockvest is a U.S. SEC
`7 approved platform that doubles as a decentralized cryptocurrency exchange as
`8 well as a hedge fund." (Emphasis added.)
`71. Blockvest's public Facebook page likewise falsely states that:
`"Blockvest is a U.S. SEC approved platform . ... " (Emphasis added.)
`72. Blockvest's website additionally reflects as a milestone in its
`12 development the following: "Blockvest DEX GETS SEC REG A+ APPROVAL
`13 & PLANS TO 'TEST THE WATERS' WITH IPO." (Emphasis added.)
`In or about June 2018, Ringgold falsely stated at a blockchain
`conference, the BE Forum: "Good news, we just got our Reg A approval from the
`16 SEC." (Emphasis added.)
`In or about July 2018, Ringgold falsely stated at another blockchain
`18 conference, the DC Con: "The SEC says it's a security so we registered with the
`19 SEC' (emphasis added) and that:
`"Now, we have the 'JCO' - JOBS Crypto Offering - ... a
`combination of Reg A, Reg A+, a little sprinkle of Reg S.
`It keeps you out [of] 'Reg Jail."'
`75. Blockvest, BIG, and Ringgold are not registered with the SEC in any
`24 capacity.
`76. The BL V offering, the Blockvest30, and the Blockvest DEX are not
`registered with or "approved" by the SEC.
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.16 Page 16 of 30
`False claims regarding other regulatory approvals
`77. Blockvest and Ringgold also are making numerous misleading
`statements about supposed CFTC and National Futures Association ("NFA")
`4 approval, despite the NF A issuing a cease-and-desist letter to Blockvest on June
`5 26, 2018.
`78. The NF A is the industrywide, self-regulatory organization for the
`7 United States derivatives industry. The NF A is designated by the CFTC as a
`registered futures association. The Commodity Exchange Act, as amended,
`requires certain firms and individuals that conduct business in the derivatives
`industry to register with the CFTC. CFTC regulations also require, with few
`exceptions, CFTC-registered firms and individuals to be NF A members. The
`12 CFTC has delegated registration responsibility to NF A.
`79. Blockvest's website falsely states that: '"Under the helpful eye of the
`14 CFTC and NF A, we look forward to providing certain qualified investors access
`to this evolving market', the Fund will be managed by Blockchain Investment
`16 Group, LLP, a commodity pool operator registered with the [CFTC] and a member
`17 of the [NF A]." (Emphasis added, internal quotes in original.)
`80. While Blockvest was registered as a CTA in July 2018, BIG and the
`similarly-named "Blockchain Investment Group LLP" have never been registered
`20 as commodity pool operators with the CFTC.
`81. Ringgold' s website states that Rosegold is "a CFTC registered
`22 Commodity Trading Advisor firm."
`82. Neither Rosegold nor Ringgold are registered with the CFTC in any
`83. Blockvest's website misrepresents that one of the company's
`26 management members-"ChiefMarketing Strategist" George B. Freeman-is
`27 "licensed with FINRA/NF A."
`Case 3:18-cv-02287-GPC-MSB Document 1 Filed 10/03/18 PageID.17 Page 17 of 30
`( I
`84. According to NF A and SEC records, Freeman has not been registered
`2 with the CFTC since October 2014 and has never been registered with the SEC or
`3 FINRA in any capacity.
`85. On June 26, 2018, the NFA sent Blockvest a cease-and-desist letter
`5 directing the company to stop to stop falsely claimin