SEC Charges Nova Labs with Unregistered Securities Offerings and False Statements

The Securities and Exchange Commission (SEC) has taken action against Nova Labs, filing charges for allegedly conducting unregistered securities offerings and making false statements about business partnerships to mislead investors.

Allegations of Unregistered Securities Offerings

According to the SEC’s complaint, Nova Labs has been selling unregistered investment contracts since April 2019 through two main products: Hotspots and a Discovery Mapping Program. Hotspots are electronic devices that mine three different Nova Labs crypto assets (HNT, MOBILE, and IOT tokens), while the Discovery Mapping Program rewards users with MOBILE tokens for providing network data.

The complaint alleges that Nova Labs promised investors their Hotspots and participation in the Discovery Mapping Program would generate returns through the company’s efforts to build and expand a wireless network. This, in turn, would increase demand and value for their crypto tokens, leading to profits for investors.

False Statements about Business Partnerships

A serious allegation of fraud has been made against Nova Labs, with the SEC stating that the company falsely told investors that major companies, including Nestlé, Salesforce, and Lime, were actively using its wireless network.

When Nestlé and Lime discovered Nova Labs was publicly claiming these nonexistent relationships, they sent cease-and-desist letters to the company. The SEC charges that these false partnership claims were material to investors’ decisions to purchase Nova Labs’ Hotspots and company stock, violating antifraud provisions of federal securities laws.

SEC Charges and Remedies

The case specifically cites violations of Sections 5(a) and 5(c) of the Securities Act of 1933 for unregistered securities offerings and alleged fraud violations under Section 17(a)(2). The Commission is seeking several remedies, including:

  • Permanent injunctions
  • Disgorgement of illegal profits with interest
  • Civil monetary penalties

As the SEC continues to focus on cryptocurrency companies operating outside securities registration requirements while allegedly making false claims to attract investors, this enforcement action serves as a reminder of the importance of regulatory compliance in the cryptocurrency and investment spaces.

For more news on cryptocurrency and financial regulations, visit Global Crypto News.

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