Judge Rules Against Green United in $18M Crypto Mining Fraud Case

TLDR

• Green United LLC failed to dismiss SEC lawsuit over $18M crypto mining fraud
• SEC accused executives of selling mining equipment for non-existent blockchain
• Judge ruled SEC adequately alleged elements of security in form of investment contract
• Defendants’ claim that SEC lacks authority over digital assets was rejected
• The case will now proceed to discovery or trial stage

Green United LLC, a cryptocurrency mining firm, has failed in its attempt to dismiss a lawsuit filed by the U.S. Securities and Exchange Commission (SEC).

The case, which involves allegations of an $18 million fraudulent crypto mining scheme, will now move forward after a judge’s recent ruling.

The SEC accused Green United executives Wright Thurston and Kristoffer Krohn of operating a fraudulent operation that sold mining equipment for a blockchain that didn’t actually exist.

The company allegedly marketed “Green Boxes” and “Green nodes” as miners for a token called GREEN on the “Green Blockchain.”

Judge Ann Marie McIff Allen made the decision on September 23, stating that the defendants did not successfully counter the SEC’s securities allegations.

The judge agreed that the SEC had properly alleged all necessary elements of a security in the form of an investment contract.

The SEC’s lawsuit claims that Green United raised about $18 million through this scheme. Investors reportedly did not receive any of the Bitcoin that was supposed to be mined by the company.

Instead, the hardware sold by Green United was actually Bitcoin mining equipment that didn’t mine the advertised GREEN tokens.

Judge Allen declined to dismiss the SEC’s fraud claims against Thurston. She stated that his actions created an “illusion” that investors were earning GREEN tokens through mining. In reality, the distribution of tokens was allegedly based on Thurston’s discretion and how many Green Boxes investors owned.

The defendants tried to argue that the SEC lacked authority over digital assets. They claimed that Congress had already considered and rejected such authority.

However, Judge Allen dismissed this argument, stating that the SEC’s action was not a novel attempt at regulation but rather a pursuit of regulatory goals set by Congress ninety years ago.

The judge’s decision means that the lawsuit will now proceed to the next stage of the legal process, which is typically either the discovery phase or trial.

This development marks a significant step in the SEC’s efforts to crack down on alleged fraudulent activities in the cryptocurrency space.

Green United was founded by Thurston in Utah and operated from April 2018 until at least December 2022. Krohn was involved in contractually promoting the scheme. The two executives had filed motions to dismiss the SEC’s lawsuit on May 19, but these efforts have now been rejected.

This case highlights the ongoing challenges in the cryptocurrency industry, where the line between innovative projects and potentially fraudulent schemes can sometimes be blurry. It also underscores the SEC’s continued focus on enforcing securities laws in the digital asset space, even as debates continue about the extent of its regulatory authority in this area.