Lucy Jane 
Defendants Seek Dismissal of $18M Crypto Scheme Lawsuit
Two individuals accused of operating a fraudulent $18 million cryptocurrency mining scheme by a U.S. securities regulator are seeking dismissal of the lawsuit, arguing in court that the agency has no authority over cryptocurrencies.
Wright Thurston and Kristoffer Krohn filed separate motions to dismiss a Securities and Exchange Commission lawsuit on May 19.
In March, the SEC filed a lawsuit against the pair and the purported cryptocurrency mining and development firm Green United LLC, accusing them of fraudulently offering securities by selling “Green Boxes” and “Green Nodes” marketed as miners for the GREEN token on the “Green Blockchain.”
Thurston founded the company, which Kronn contractually promoted.
In their arguments for dismissal of the lawsuit, Thurston and Krohn asserted that the SEC lacks authority over the digital asset ecosystem, adding that Congress “considered and rejected” the SEC’s crypto authority.
They said the SEC has been “unclear and inconsistent” in defining cryptocurrencies.
They echoed recent claims that the regulator was engaging in “regulation by enforcement,” adding:
“The SEC has instead abandoned any effort at proposed legislation or rulemaking, opting instead to attempt to litigate its way to a coherent regulatory scheme.”
Among other arguments to dismiss the case, the SEC had not established that the Green Boxes were securities offerings or “investment contracts,” as the regulator claimed in its March complaint.
In its March lawsuit, the SEC alleged that the hardware sold by Green United consisted of Bitcoin mining rigs that did not mine GREEN as advertised and that the suspected blockchain never existed.
According to the regulator, the alleged scheme raised approximately $18 million, and investors “did not receive” any of the BTC mined by GREEN United.
Gary Gensler, chairman of the Securities and Exchange Commission, has long asserted the Commission’s authority over cryptocurrencies and stated that most crypto assets, excluding Bitcoin, are securities under the Howey test.
