Participants of a $5.6 million token sale did not expect a return on investment, the NAC Foundation argued.
The NAC Foundation has accused the United States Securities and Exchange Commission of misconduct in an ongoing case.
According to court documents Oct. 20, Rowland Marcus Andrade and his company NAC Foundation asked a San Francisco federal judge to dismiss the SEC’s June lawsuit alleging that he and his associate Jack Abramoff defrauded investors in a $5.6 million token offering.
Andrade argued that the SEC “purposefully attempted to mislead the court” by accusing him of offering a technology that had never been developed. According to the defendant, the SEC was aware that he held patents for Anti-Money Laundering technology related to NAC Foundation’s digital currency known as “AML BitCoin.”
Furthermore, Andrade said that the sale terms of AML BitCoin made it clear that the tokens were not investment contracts. He claimed that anyone who bought AML BitCoin had agreed in writing that they knew the tokens were not an investment and that all purchasers were aware that the tokens were a “medium of exchange and not a pooled interest in any business entity or common enterprise.”
The defendant reportedly stressed that written sales terms spelled out that their customers should not expect a return on investment and that the tokens were not a debt instrument.
This, along with the SEC’s purported failure to state a critical element of the Howey test, demonstrates that the token is not a security, the defendants argued, meaning that the SEC “has no case.”
As reported, the SEC brought an action against Andrade and NAC Foundation in late June 2020. In the lawsuit, the securities regulator accused the defendants of raising up to $5.6 million for AML BitCoin starting in August 2017 and continuing till 2018.
The case involves Jack Abramoff, a notorious lobbyist who was imprisoned for corruption from 2006–2010. According to Law360, Abramoff is not a party to the action against Andrade because he faced a separate SEC suit. The former lobbyist settled out of the case in July, paying a total of $55,500 in disgorgement and prejudgment interest.
