Nova Labs Settles SEC Charges, Pays $200,000 Fine

Nova Labs, the company behind the Helium blockchain, has reached an agreement with the U.S. Securities and Exchange Commission (SEC) to pay a $200,000 fine to resolve civil securities fraud charges. The SEC had filed these charges in January, alleging that Nova Labs misled institutional investors during a funding round that took place from late 2021 to early 2022. During this period, Nova Labs raised $200 million in fresh capital at a $1 billion valuation.

The SEC's complaint asserted that Nova Labs falsely claimed that several prominent enterprise customers, including Nestle, Salesforce, and Lime, were using Helium technology. The regulator accused Nova Labs of exaggerating the nature of its relationships with these companies to attract investments, portraying them as customers and users of its technology. According to the SEC, Nova Labs' actual interactions with these corporations were minimal and primarily occurred before the launch of the Helium network in mid-2019.

For instance, Nestle's involvement with Nova Labs was limited to a small-scale test of some component hardware in its water-delivery business in 2018, before Nova Labs entered the crypto industry. Lime's relationship with Nova Labs consisted of two in-person demonstrations of the company's hardware to just two Lime employees in early 2019. Both Nestle and Lime eventually sent Nova Labs cease-and-desist orders, threatening legal action if the company continued to falsely claim an ongoing relationship with them.

As part of the settlement agreement, the SEC agreed to drop two other claims that Nova Labs violated federal securities laws. These claims included the sale of three of its tokens—the Helium Network Token (HNT), the Helium Mobile Network Token (MOBILE), and the Helium IoT Network Token (IOT)—which the SEC had alleged in January to be securities. These claims were dropped with prejudice, meaning the SEC is barred from bringing future cases under the same allegations.

Nova Labs celebrated the settlement in a blog post, describing it as a “major win for Helium and the People’s Network.” The company stated that the outcome establishes that selling hardware and distributing tokens for network growth does not automatically make them securities in the eyes of the SEC. However, the blog post did not mention the $200,000 settlement or the allegations of misleading investors.

When reached for comment, Nova Labs Chief Legal Officer Sarah Aberg noted that while the settlement agreement prohibits the company from admitting or denying the claims, “we can point out that, both at the time of those statements and today, data usage on the Helium Network has always been publicly available.” The settlement agreement, filed in the Southern District of New York, is subject to approval by a federal judge.

This settlement highlights the ongoing scrutiny by the SEC of cryptocurrency companies and their practices. The regulator has been increasingly focused on ensuring transparency and accuracy in the information provided to investors, particularly in the rapidly evolving blockchain and cryptocurrency sectors. The case against Nova Labs serves as a reminder to companies in this space to be cautious and truthful in their communications with potential investors, as misrepresentations can lead to significant legal and financial consequences.