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SEC levied its first charges against DeFi Company for illegally raising $30 Million in unregistered offerings

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Joyashree Dey Follow

INDIA

Aug, 07 2021

Aug, 07 2021

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On 6th August the Securities and Exchange Commission charged Gregory Keough and Derek Acree, and their company Blockchain Credit Partners for unregistered sales of more than $30 million of securities to investors over the course of a year.

The two Florida men and their Cayman Islands Company offered and sold securities using smart contacts in fraudulent offerings through “decentralized finance” (DeFi) Money Market from February 2020 to February 2021. According to the SEC’s order, they used so-called DeFi technology to trade two types of cryptocurrencies named, mTokens and DMG while misleading investors about the operations & profitability of their business.

The company allegedly allowed investors to purchase one of the digital tokens using well known digital assets like Ether. They promised to pay investors nearly 6.3% interest, claiming investor funds would be used to buy “real-world” assets such as car loans that generated income. Director of the SEC Enforcement Division, Gurbir S. Grewal stated, “Full and honest disclosure remains the cornerstone of our securities laws- no matter what technologies are used to offer and sell those securities.”

However, instead of notifying the company’s barred from generating a sustainable income, they started to show fake investments to the investors. SEC filed charges of numerous defilements of the Security Act against the pair, along with charges of violating the anti-fraud provisions.

Both Derek and Gregory have agreed to the regulator’s cease and desist order but stay biased to the charges. They now will have to disgorge almost $12.85 million, and each of the guilty has to pay an additional penalty of $125,000.

For the first time SEC has taken notice at a DeFi project, though it seems the actual operation was anything but decentralized. Commissioner Hester Peirce even criticised via Twitter to call DeFi Money Market as “decentralized in name only” or DINO.


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Joyashree Dey

CBW - External Analyst

INDIA

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