The SEC sues Nova Labs over unregistered crypto securities, accusing them of selling mining devices and a data-trading program.

The Securities and Exchange Commission (SEC) has filed a lawsuit against Nova Labs, the company behind the Helium Network, for allegedly selling unregistered crypto securities. The SEC claims that Nova Labs offered two main products: electronic devices called “Hotspots” which mine three different Nova Labs crypto assets (HNT, MOBILE, and IOT tokens), and a program known as “Discovery Mapping” where users could trade their network data for crypto assets. The SEC alleges these offerings were unregistered investment contracts and that Nova Labs misled investors with false claims about partnerships with companies like Lime, Nestlé, and Salesforce. This legal action was taken just days before the departure of SEC Chair Gary Gensler, known for his critical stance on cryptocurrencies.

Here are some additional details based on the lawsuit filed by the SEC against Nova Labs:

• Nature of the Allegations: The SEC accuses Nova Labs of violating securities laws by offering and selling securities without proper registration. Specifically, they targeted the sale of “Hotspots,” which are mining devices that reward users with HNT, MOBILE, and IOT tokens for providing wireless network coverage.

• Discovery Mapping Program: This is another focal point of the lawsuit. The program allowed users to earn MOBILE tokens by sharing data about wireless connectivity, which the SEC argues constitutes an investment contract because participants expected profits from the efforts of Nova Labs.
• Misleading Claims: The SEC alleges that Nova Labs made deceptive statements about partnerships with major corporations like Lime, Nestlé, and Salesforce, suggesting these partnerships would enhance the value of their tokens or the utility of their network. There were claims that these partnerships were either exaggerated or non-existent.
• Tokenomics and Promises: Nova Labs promised that the value of their tokens would increase due to the network’s growth and the adoption by these supposed partners. The SEC contends these promises were part of the scheme to attract investors to buy the mining hardware and participate in the Discovery Mapping program.
• Financial Impact: The lawsuit seeks to recover profits gained from these alleged securities violations, impose civil penalties, and provide disgorgement for any ill-gotten gains. This could involve significant financial repercussions for Nova Labs.
• Regulatory Environment: This lawsuit fits into the broader context of regulatory scrutiny of cryptocurrencies in the U.S., with the SEC under Gensler attempting to enforce existing securities laws on crypto assets and their issuers.
• Timing: The lawsuit was filed close to Gensler’s exit, which some might see as a final move in his tenure to address what he views as non-compliance within the crypto industry.