Nova Labs Reaches Settlement with SEC Over Securities Fraud Allegations
Nova Labs, the parent company behind the Helium blockchain, has agreed to pay $200,000 to the U.S. Securities and Exchange Commission (SEC) to resolve civil allegations of securities fraud that were brought against the company in January, according to a court filing made on Thursday. The company neither admits nor denies any wrongdoing but chose to settle the claims that it misled institutional investors during a funding round that took place from late 2021 to early 2022, wherein it raised $200 million at a valuation of $1 billion.
Allegations of Misleading Investors
In the SEC’s complaint, Nova Labs is accused of providing false information to potential investors regarding several major corporate clients, including Nestle, Salesforce, and Lime, which the SEC claims were purportedly utilizing Helium’s technology. The SEC states that Nova Labs exaggerated its relationships with these companies to attract investments, misrepresenting them as clients and users of its technologies. The complaint asserts that Nova Labs’ actual interactions with Nestle, Lime, and Salesforce were minimal and primarily occurred before the launch of the Helium network in mid-2019.
Details of the Relationships with Corporate Clients
For instance, the SEC claims that Nestle’s engagement with Nova Labs involved limited testing of some of its equipment components within its water delivery business back in 2018, which preceded Nova Labs’ entry into the cryptocurrency sector. Additionally, the company’s ties with Lime, a scooter rental service, were confined to two in-person demonstrations of Nova Labs’ equipment attended by only a couple of Lime employees, one of whom reportedly left the company shortly thereafter, according to the SEC.
Warnings from Corporate Partners
The SEC also noted that both Nestle and Lime eventually issued cease-and-desist orders to Nova Labs, threatening legal action if the company continued to use their trademarks while falsely claiming ongoing relationships with them.
Settlement Terms and Future Implications
As part of the settlement with the SEC, the regulator has agreed to dismiss two additional lawsuits alleging that Nova Labs breached federal securities laws, particularly regarding the sale of its three tokens—the Helium Network Token (HNT), Helium Mobile Network Token (MOBILE), and Helium IoT Network Token (IOT)—which the SEC labeled as securities in its January filings. These lawsuits will be dismissed with prejudice, preventing the SEC from bringing further actions on the same grounds.
Nova Labs’ Response to the Settlement
In a blog post, Nova Labs celebrated the settlement as a “significant victory for Helium and the People’s Network.” The company emphasized that with the dismissal of the lawsuits, they can confidently assert that all compatible Helium access points and the distribution of HNT, IOT, and MOBILE tokens through the Helium network do not qualify as securities. The blog post did not mention the $200,000 fine or the allegations of misleading investors.
Comments from Nova Labs’ Legal Counsel
In response to inquiries regarding the situation, Nova Labs’ Chief Legal Officer, Sarah Aberg, stated to CoinDesk that although the settlement prohibits the company from acknowledging or denying the claims, “we can point out that both at the time of these statements and today, data usage on the Helium network has always been publicly available.” The settlement agreement filed on Thursday in the Southern District of New York awaits approval from a federal judge.
