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- The SEC has filed a lawsuit against Helium creator Nova Labs, accusing it of offering unregistered securities through its blockchain and crypto-asset projects
- Allegations include misleading investors about partnerships with major corporations, including Nestlé, Salesforce, and Lime
- The SEC seeks a permanent injunction, civil penalties, and disgorgement of profits, among other remedies
The Securities and Exchange Commission (SEC) has initiated legal proceedings against Nova Labs, alleging the company unlawfully sold unregistered securities and misled investors about its business relationships. Since 2019, Nova Labs has raised millions through the sale of crypto-related devices and programs, including “Hotspots” and the Discovery Mapping Program. The SEC claims Nova Labs falsely implied partnerships with firms like Nestlé, Salesforce, and Lime to entice investors, despite knowing these claims were inaccurate.
SEC Cool on Hotspots
The SEC’s complaint centers on Nova Labs’ use of blockchain technology to market “Hotspots” — devices designed to generate crypto assets such as Helium Network Tokens (HNT). These tokens, along with others like MOBILE and IOT, were positioned as lucrative investments dependent on Nova Labs’ efforts to build a wireless network.
“Nova Labs created a framework where investors were led to believe their profits were tied to the company’s success in creating demand for these tokens,” the SEC stated in its filing. The agency highlighted internal communications showing Nova Labs was aware of the legal risks, with one executive describing their strategy as a “cheat for an ICO.”
Partnerships Under the Microscope
A key allegation is Nova Labs’ claim that companies like Nestlé and Salesforce utilized its network, a statement central to its marketing strategy. The SEC revealed that these companies issued cease-and-desist letters upon learning of these claims, undercutting Nova Labs’ credibility. The misrepresentation of high-profile partnerships “was an important part of the total mix of information investors considered,” the SEC argued.
At the time, Helium’s CEO Amir Haleem called the accusations “frustrating and upsetting”, saying that they were the result of trials that they “don’t always know when users stop using the network.”
In 2022, investor Bill Ackman, famous for losing millions publicly shorting Herbalife, received backlash on Twitter after posting a 19-strong tweet thread in which he endorsed Helium, which he said had changed his mind on crypto and had led him to “understand how a token could build intrinsic value over time.” However, the crypto community quickly informed Ackman that Helium was, in their opinion, a Ponzi scheme and that his support was a huge mistake.
Just three months later, Binance delisted the HNT token, which has dropped 60% in the past month and is miles off its $52 top, which it achieved in 2021.
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