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


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.

Joyashree Dey
CBW - External Analyst
INDIA