SEC Charged A DeFi Lender For Raising $30M Via Unregistered Sales

The SEC charged a DeFi lender for raising $30M via unregistered sales along with its two executives as we are reading more in our latest cryptocurrency news today.

The SEC charged a Defi Lender located in the Cayman Island dubbed Blockchain Credit Partners along with Gregory Keough and Derek Acree for selling the unregistered securities from 2020 to February 2021. As per a recent press release, the executives used smart contracts to sell two types of tokens which the SEC considered securities but more precisely those were mTokens that could be bought with specific digital assets which paid out 6.25% interest to investors.

The statement indicated that BCP used “investor assets to buy real-world assets, car loans” or similar, that generates sufficient income to pay out the promised interest and the surplus profits. The second token is DMG a government coin that gives the users the right to vote and to profit from DMG re-sales:

“Full and honest disclosure remains the cornerstone of our securities laws – no matter what technologies are used to offer and sell those securities. This allows investors to make informed decisions and prevents issuers from misleading the public about business operations.”

The lawsuit marked the first time that the SEC went after a DeFi protocol. Daniel Michael who is the chief of the SEC Enforcement Division’s complex financial Instruments Unit and said that the federal laws apply with equal force to the frauds that can hide the operations with emerging technologies. The securities laws apply with equal force to the frauds happening today with the new technology. The labeling of the offering as decentralized and the securities as governance tokens didn’t hinder from ensuring that DeFi Money Market which was immediately shut down and that investors were paid back.

Acree and Keough will have to pay the fines of up to $125,000 to the SEC as they both agreed to pay $12.8 million in disgorgement via a cease-and-desist order as both executives settled the case without making more comments on the accusations.

As recently reported, Former CFTC Chair Christopher Giancarlo argued that CFTC is the only regulatory agency that has experience regulating the markets for BTC and crypto. Amid the US SEC expanding the scope of oversight of crypto, CFTC Commissioner Brian Quintenz argued that crypto regulation doesn’t fall under the SEC’s jurisdiction.