In a recent lawsuit, the US Securities and Exchange Commission argued that Bitcoin hosting services provided by third parties can constitute a security offering. This is a view strongly disagreed with by an industry leader.
SEC sued Bitcoin) (BTCVBit mining company and founder Danh Vo in a Delaware federal district court on Tuesday, accusing both of defrauding investors of $48 million between 2018-2022 through the sale of more hosting contracts than mine rigs.
“VBit’s Hosting Agreements are investment contracts and therefore securities,” The SEC claimed that VBit’s investment contracts met the Howey Test criteria for defining securities.
“Investors who purchased Hosting Agreements did so with the expectation of earning passive income and relied exclusively on VBit’s efforts to earn a profit as the investors did not possess, control, or have agency over the mining rigs they purportedly purchased,” The agency claimed.
SEC claims are a rare holdover of how it enforced securities laws under Biden’s administration. Crypto supporters have said that the Biden administration grouped most businesses and cryptocurrencies under securities law.
SEC claims VBit did not follow standards of the industry
SEC Claims Vo’s Bitcoin mining hosting The company’s operation was far from standard in the industry, as investors were unable to monitor their own rigs and retained full control.
VBit also sent hashrates to a miner pool that it controlled, and this factor seemed to have been a determining factor for the SEC in classifying VBit’s Bitcoin hosting agreement as a financial security.
The SEC stated: “The fortunes of each investor were purportedly tied to the fortunes of other investors because every investor’s chance of earning a profit was tied directly to the performance of the greater VBit mining pool, and the more investors recruited into the mining pool, the greater the chances of earning more Bitcoins.”
SEC view should not impact Bitcoin hosted mining industry
Mitchell Askew is the Head of Blockware Intelligence and told Cointelegraph: “Pooling hashrates for hosting cryptocurrency mining pools” is not industry practice. Bitcoin mining Service providers
Related: Bitcoin miners enter ‘harshest margin environment of all time’
“Hosted Bitcoin mining simply means a client purchases a computer and electricity,” “He said” “There’s no pooling of capital, no profit-sharing, and no reliance on a promoter to generate returns. Under the Howey test, that is very clearly not a security.”
“I don’t think this affects the hosted mining industry at all. Legitimate hosted mining has no resemblance to an investment contract, and this theory has no legs to stand on.”
SEC didn’t immediately reply to our request for comment.
It is important to note that the word “you” means “you”. SEC’s view The Trump administration has made it clear that Bitcoin mining on a host can be classified as a security. This classification allows the SEC more support for the Bitcoin industry.
The agency has been involved in several high-profile crypto investigation that were started by the Biden Administration. since been droppedThere are still many who do not understand this. fraud-related lawsuits There are currently no ongoing events.
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Source: cointelegraph.com
