Earlier this week, SEC Enforcement staff lost a bid for a preliminary injunction against a prospective ICO in its pre-offering testing phase.

Blockvest was preparing for an ICO of "BLV" tokens. Its website touted the endeavor as the "first licensed and regulated tokenized cryptocurrency exchange and index fund based in the United States," and showed pictures of the seals of the SEC, CFTC, NFA, and others. It also claimed to be regulated by the fictitious "BEC" (Blockchain Exchange Commission), which not coincidentally appeared to share the same Washington address as the SEC.

So how could the SEC lose this one? Especially in light of its recent string of victories, touted in its recent Statement on Digital Asset Securities Issuances and Trading (SEC Nov. 16, 2018), here.

It's always "facts and circumstances." Here, the SEC was successful in essentially shutting down the operation with a TRO. And it turns out that Blockvest was only in the testing phase for its "private sale," which would've been followed by a "pre-sale," before its ICO. The only documented sales of BLVs were to 32 "testers" known to the promoter, conveying no interest in the underlying venture. The website was only in its test phase and, because they knew they only testing the platform, the "tester/purchasers" had no expectations of any real profits. Moreover, because the TRO shuttered the operation, the SEC could not show a likelihood of continuing harm. On those disputed facts, the Court declined to enter a preliminary injunction.

So it looks like the SEC won the war but lost the preliminary-injunction battle by nipping this ICO in the bud. The case is SEC v. Blockvest, No. 18CV2287-GPB(BLM) (USDC SDCA Nov. 27, 2018).