SEC v. Nova Labs, Inc. — U.S. Securities and Exchange Commission Litigation Release No. 26291, dated April 24, 2025.
The SEC charged Nova Labs, Inc. with making false claims to investors about major companies using its Helium Network. Nova Labs settled by agreeing to a $200,000 penalty, without admitting or denying the allegations related to misrepresentations in its stock sales.
In Plain English
Imagine a company selling special internet devices that promise to earn you money. This company told people that big companies like Lime and Nestlé were already using their special internet. But this wasn't true, and the company got in trouble for lying to investors. They had to pay a fine.
Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.
How the Alleged Scheme Worked
- Selling 'Hotspots' and a Program Nova Labs offered and sold 'Hotspots' – electronic devices – and a 'Discovery Mapping Program.' These were presented as ways for investors to earn crypto assets like HNT, MOBILE, and IOT.
- Promising Returns Through Network Growth Investors were promised that their earnings would grow if Nova Labs successfully built and created demand for its wireless network, which relied on these crypto assets. The idea was that a successful network would increase the value of the tokens.
- Claiming Major Corporate Endorsements To attract investors, Nova Labs falsely stated that large companies, including Nestlé, Salesforce, and Lime, were using and relying on the Helium Network. These claims were made in promotional materials and discussions with potential investors.
- Misrepresenting Partnerships as User Adoption These statements falsely suggested that these major companies were customers or active users of Nova Labs' network, implying they would drive value for the crypto assets. This was a key part of the information investors considered.
- Reality: No Actual Usage In reality, companies like Nestlé and Lime were not customers and were not using the Helium Network. Nova Labs knew or recklessly disregarded this fact when making its claims.
- Cease-and-Desist Letters Issued When Nestlé and Lime discovered that Nova Labs was publicly touting these non-existent relationships, both companies issued formal cease-and-desist letters to Nova Labs.
- Violating Securities Laws These false and misleading statements about business relationships that did not exist violated federal securities laws, specifically antifraud provisions and laws requiring registration for securities offerings.
The Enforcement Action
On April 23, 2025, the SEC obtained a final judgment by consent against Nova Labs, Inc. The judgment relates to Nova Labs' violations of Section 17(a)(2) of the Securities Act of 1933 for making misrepresentations in connection with its offer and sale of preferred stock in a private placement. Nova Labs consented to pay a $200,000 civil penalty. The SEC dismissed other claims with prejudice. The SEC's litigation was conducted by Emmy E. Rush and Christopher Colorado and supervised by Judith Weinstock, Sheldon L. Pollock, Thomas P. Smith, Jr., and Jack Kaufman.
Named in this action: Nova Labs, Inc..