US SEC closes $ 30 million defi money market in first decentralized financial crisis – regulation Bitcoin News
The US Securities and Exchange Commission (SEC) has launched its first enforcement measures with decentralized financing (defi). The commission has indicted a Defi platform and its executives with unregistered securities sales of more than $ 30 million and misleading investors.
SEC’s first enforcement action on decentralized funding
The SEC announced on Friday that it had taken its first enforcement action with decentralized funding (defi). The case is about “securities with defi technology”.
Regulators charged two Florida men – Gregory Keough and Derek Acree – and their Cayman Islands company, Blockchain Credit Partners, with “unregistered sales of more than $ 30 million in securities.” The three were also charged with “misleading investors about the operation and profitability of their Defi Money Market business”.
They used smart contracts and defi technology to sell two types of digital tokens: mtokens and DMM governance tokens (DMG). The former promised to pay 6.25% interest, while the latter allegedly “gave holders certain voting rights, a share of excess profits, and the ability to benefit from reselling DMG governance tokens on the secondary market”.
The SEC stated that in offering and selling the two tokens it claimed that “Defi Money Market could pay the interest and profits because it would use investor assets to buy ‘real world’ assets that generated revenue, such as Car loans. “
When they realized that “the price volatility of the digital assets used to purchase the tokens carries the risk that the income generated by income-generating assets will not be sufficient to cover the appreciation of investors’ capital,” they failed to inform investors. Instead, they “misrepresented how the company worked, including by falsely claiming that Defi Money Market had bought car loans which they posted on the Defi Money Market website.”
The SEC found that the defendants “used personal funds and funds of the other company they control to make principal and interest payments on Mtoken redemptions.”
Daniel Michael, Head of Complex Financial Instruments, SEC Enforcement Division, commented: “Marking the offering as decentralized and the securities as governance tokens did not prevent us from ensuring that the Defi Money Market closes immediately and investors repaid. “The SEC announcement adds:
Without admitting or denying the findings in the SEC ruling, respondents agreed to an injunction that includes a total of $ 12,849,354 levy and fines of $ 125,000 each for Keough and Acree.
According to the commission, the defendants financed the smart contracts so that mtoken holders can redeem their tokens and receive all principal and interest owed.
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