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The United States Securities and Exchange Commission (SEC) files a lawsuit against two crypto executives in its first-ever Decentralized Financial Securities (DeFi) case.
In a new press release, the SEC said it has indicted two Florida men and their Cayman Islands company over unregistered sales of more than $ 30 million of securities using smart contracts and DeFi technology.
The SEC also claims that Gregory Keough, Derek Acree, and their DeFi lending firm, Blockchain Credit Partners, have misled investors about the operations and profitability of their DeFi Money Market business.
The pair reportedly sold two different types of digital tokens, including mTokens that earned 6.25% interest and DMG governance tokens that would give holders the right to vote and share in excess profits.
Keough and Acree allegedly claimed that DeFi Money Market could pay interest and profits by using investor assets to buy income-generating real-world assets, such as auto loans. The SEC, however, says the price volatility of the digital assets used to purchase the tokens was too high, posing a significant barrier to Keough and Acree’s ability to pay for the appreciation they promised with each token. .
Instead of informing their investors, the pair allegedly claimed that DeFi Money Market bought auto loans and used personal funds as well as funds from another company to pay off mToken buybacks.
Daniel Michael, head of the complex financial instruments unit of the SEC’s enforcement division, says federal securities laws “apply with equal force” to frauds involving modern technology.
“Here, labeling the offering as decentralized and the securities as governance tokens did not prevent us from ensuring that DeFi Money Market was immediately closed and investors were reimbursed.”
The SEC claims that the mTokens and DMG governance tokens were sold as unregistered investment contracts. The case represents the SEC’s first involving securities and DeFi technology.
Keough and Acree have agreed to an SEC cease and desist order that includes remission of nearly $ 12.85 million and penalties of $ 125,000 each. The men neither admitted nor denied the findings of the SEC order.
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Featured Image: Shutterstock / icedmocha
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