US SEC Busted Company in Defi Money Market

The SEC announced on Friday that they have taken their first action against the illegal tokenization of decentralized Finance (Defi) cryptocurrency. The subjects of the activities involve “securities using Defi technology.”

About the Case

The US Security and Exchange Commission enacted upon allegations on a company that was selling digital tokens. Usually, companies dealing with Defi technology must be authorized after registering with the Wall Street regulator, however, this one didn’t meet the compliance.

The regulators tracked down an unregistered sale worth more than $30 million. For this, the SEC imputed two Floridan men, Gregory Keough and Derek Acree. These two men are the top executive of the company that the SEC took under custody. The Blockchain Credit Partner is based in the Cayman Islands. 

SEC Announcements Disclosing The Depth of the Defi Monetary Fraud

According to data from the mainstream media, the SEC disclosed that the company was involved in “illicitly offering securities through its Defi Money Market platform from February 2020 to February 2021.” These entities were also charged “for misleading investors concerning the operations and profitability of their business Defi Money Market.”

The company which is alleged of the larceny sold two types of tokens — mtokens and DMM governance tokens (DMG). The company promised a profitable return of 6.25% on the possession of ‘mtokens’ while the latter was offered with the promise that its holder would get “certain voting rights, a share of excess profits, and the ability to profit from DMG governance token resales in the secondary market.” 

The SEC disclosed that the company conveyed its promises to the buyers of the digital asset by stating that “Defi Money Market could pay the interest and profits because it would use investor assets to buy ‘real world’ assets that generated income, like car loans.”

The Chair of SEC repeatedly mentioned in a press conference that he considered Defi money and “every ICO is a security.” Hence, it must be registered under the SEC for heightened investor protection and reducing monetary scams and fraud. 

SEC Enforcement Director Gurbir Grewal stated that “Full and honest disclosure remains the cornerstone of our securities laws — no matter what technologies are used to offer and sell those securities.” 

The disclosure announcements from the regulators on this case stated that the alleged entity came to retaliation that “the price volatility of the digital assets used to purchase the tokens created the risk that the income generated through income-generating assets would be insufficient to cover appreciation of investors’ principal.”

 However, instead of following moral ethics, they continued to be dishonest with their customers to gain profits at the cost of investor protection. They “misrepresented how the company was operating, including by falsely claiming that Defi Money Market had bought car loans that they displayed on Defi Money Market’s website.” 

The alleged persons “used personal funds and funds from the other company they controlled to make principal and interest payments for mtoken redemptions.” 

Source: Bitcoin.com

This is the first among many following cases. The SEC chairperson Gary Gensler has been pressing on the oversight of “securities regulations”. He urged the Senators and lawmakers to grant the SEC clear authority to police the cryptocurrency market and the activities related to it. He assured that the SEC will do everything in its power to bring down the scams and fraud prevalent due to the cryptocurrency industry.

Daniel Michael, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, made a statement– “Here, the labeling of the offering as decentralized and the securities as governance tokens did not hinder us from ensuring that Defi Money Market was immediately shut down and that investors were paid back.”  

The series of announcements by the SEC regarding this case also mentioned that the accused “without admitting or denying the findings in the SEC’s order, respondents consented to a cease-and-desist order that includes disgorgement totaling $12,849,354 and penalties of $125,000 each for Keough and Acree.”

The company is shut down with a heavy penalty.