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The Securities and Exchange Commission issued its first charges against the decentralized financial sector on Friday, accusing two people of illegally selling more than $ 30 million in securities in unregistered offers.
Friday’s SEC order revealed that two executives at Blockchain Credit Partners were using the Ethereum blockchain to sell cryptocurrencies to investors while misleading them about the company’s profitability. Specifically, investors bought cryptocurrencies using digital assets like Ether. The company then promised to pay investors more than 6% interest and that the funds would be spent on physical investments such as car loans to create additional income. The SEC determined that these “real world” investments would not generate the advertised revenues.
“Full and honest disclosure remains the cornerstone of our securities laws – regardless of the technologies used to offer and sell these securities,” said Gurbir S. Grewal, director of the enforcement division of the SEC, in a statement. “This allows investors to make informed decisions and prevents issuers from misleading the public about business transactions.”
Friday’s accusations against the company come as the federal government prepares to release new regulations for the decentralized finance and cryptocurrency markets. Earlier this week, SEC Chairman Gary Gensler called on Congress to grant the agency more powers in regulating cryptocurrency, loans and platforms.
“If we don’t fix these issues, I’m afraid a lot of people will be hurt,” Gensler said on Tuesday.
Congress has so far failed to give the SEC more authority over the cryptocurrency market, choosing this week to include language in the bipartisan infrastructure package focused on taxing digital assets. On Sunday, Senate negotiators reached a $ 1 trillion infrastructure deal, including language that would require cryptocurrency brokers to report transactions on their tax returns. But the definition of “broker” was vague and could potentially open miners to greater taxation.
It’s unclear how the cryptocurrency will perform under the new infrastructure bill. There are two amendments in the Senate which seek to clarify the language. An amendment drafted by the senses. Ron Wyden (D-OR), Cynthia Lummis (R-WY) and Pat Toomey (R-PA) would exempt minors. Another amendment from Sen. Mark Warner (D-VA) has gained popularity among lawmakers, but cryptocurrency advocates fear it will hurt the industry by creating uneven reporting requirements.
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