The Securities and Exchange Commission has taken legal action against Nova Labs, accusing the company of engaging in unregistered securities offerings and issuing misleading statements regarding business partnerships to deceive investors.

As per the SEC’s complaint, Nova Labs has been marketing unregistered investment contracts since April 2019 through two primary offerings: “Hotspots” — devices that mine three different crypto assets from Nova Labs (HNT, MOBILE, and IOT tokens), and a “Discovery Mapping Program” that incentivizes users with MOBILE tokens for supplying network data.

The allegations suggest that Nova Labs assured investors that their involvement with Hotspots and the Discovery Mapping Program would yield returns owing to the company’s efforts to construct and enhance a wireless network. They claimed this development would bolster demand and value for their crypto tokens, resulting in profits for investors.

Nova Labs made misleading statements regarding its wireless network

In a grave accusation of fraud, the SEC asserts that Nova Labs inaccurately informed investors that prominent companies, such as Nestlé, Salesforce, and Lime, were utilizing its wireless network.

The complaint indicates that when Nestlé and Lime became aware of Nova Labs publicly asserting these false associations, they issued cease-and-desist letters to the company.

The SEC contends that these inaccurate partnership claims significantly influenced investors’ decisions to acquire Nova Labs’ Hotspots and stock, thereby breaching antifraud provisions under federal securities laws.

The case specifically points to violations of Sections 5(a) and 5(c) of the Securities Act of 1933 due to unregistered securities offerings and purported fraud infringements under Section 17(a)(2).

The Commission is pursuing various remedies, including permanent injunctions, the disgorgement of unlawful profits with interest, and civil monetary penalties. This enforcement action underscores the SEC’s continued scrutiny of cryptocurrency ventures that operate outside of securities registration obligations while allegedly making false statements to entice investors.