SEC v. International Loan Network (1992), 968 F.2d 1304 (1992)

Did ILN sell "securities" in violation of federal law and is a preliminary injunction necessary?


The DC Circuit upheld the District Court ruling finding ILN's products were "securities" and subject to regulation by the SEC. The Defendants argued that the products were not securities because no money need be paid directly to ILN. The Court found that the intent was for a person to first join as a member, and then to solicit other members to join their "downline". The intent to solicit memberships by ILN was enough to warrant the preliminary injunction. The Defendants also argued that the profits an individual investor earned were due to their own efforts, and not the efforts of others. The Court agreed that while some effort on the part of the individual investor was required, the bulk of the profits were earned on account of a persons’ "downline" and were due to the efforts of others. The Appeal Court held that there was ample evidence of the need for a Preliminary Injunction to protect the public, and that the order freezing assets was proper to insure the maximum recovery for the current membership.

The full case and case summary is also available online at:

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Reference Info:Federal, D.C. Circuit, D.C. | United States

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