- The investment platform, which runs on Ethereum, is closing SMART Yield
- Platforms that fashion themselves as DAOs do not always register as firms
- SEC's allegations against BarnBridge raise questions about its broader stance
Crypto project BarnBridge DAO and its founders agreed to pay the Securities and Exchange Commission (SEC) $1.7 million to settle the latter’s accusations that they offered crypto securities to US customers illegally, CoinDesk reported.
They collected $500M+ in investments
The investment platform, which runs on the Ethereum Mainnet, is closing SMART Yield, a crypto product BarnBridge refers to as a highly rated debt instrument. According to watchdogs, SMART Yield collected more than $509 million from investors, but did not register as an investment firm regardless.
The SEC’s coming after crypto companies for supposed securities violations is nothing new in itself. However, this is the first time the omniscient regulator has targeted a crypto startup portraying itself as a decentralized autonomous organization (DAO), where the organization arranged a public vote on how to respond.
What is the problem?
Theoretically, token holders run DAOs. Any holder of BarnBridge's native token BOND token could have a say in how the platform was run. BOND was soaring recently. Platforms that fashion themselves as DAOs do not always register as firms. Their products are seen as securities even more rarely.
This is a problem if their products target US customers, as was the case with BarnBridge. The SEC has accused them of doing nothing to stop US investors from purchasing the SMART Yield product.
BarnBridge DAO and its founders will pay a total of $1.7 million in disgorgement fines. They neither admitted to nor denied the allegations.
Regulators’ stance on DeFi is threatening
SEC's allegations against BarnBridge’s product raise questions about its broader stance on staking, lending, pools, and other DeFi structures, experts told CoinDesk. As the settlement is a precedent, it provides little in the way of answers.
According to Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, the case serves to remind stakeholders that securities laws apply to everyone that wants to access US capital markets regardless of their location and the form of their organization.
Contributors
