The SEC\u2019s recent inquiry into the Tim Draper-backed DeFi Money Market platform is the most recent example in a concerning trend of increasing action by regulators against unregistered securities.<\/p>\n
It joins Kik Interactive, Ripple and Coinseed as crypto projects facing the wrath of regulators under\u00a0 aspects of securities law. <\/p>\n
The mystery behind DeFi Money Market\u2019s abrupt closure on Feb. 5 was unveiled in the project\u2019s official Telegram channel on Feb. 9, in a statement that revealed the DeFi Money Market Foundation received an investigative subpoena from the United States Securities and Exchange Commission on December 15, 2020.<\/p>\n
\u201cWe reviewed the subpoena carefully and with the assistance of counsel began complying with the legal requirement to produce documents and make other information available to the SEC,\u201d the post said. <\/p>\n
\u201cWe have begun negotiations with the SEC staff to resolve its investigation, and in an effort to reach a mutually agreeable resolution, we have concluded that an orderly wind-down of the project is best.\u201d<\/p><\/blockquote>\n
Without providing many specifics, the statement also assured that investor assets held by the DeFi Money Market \u2014 such as DAI, USDC, USDT, or ETH \u2014 would be returned to customers \u201cas soon as possible.\u201d<\/p>\n
The DeFi Money Market project was initially designed to allow cryptocurrency traders and investors access to tokenized, real-world assets. The public sale for DMG, the governance token used by the DMM DAO, concluded in Jun. 2020 after raising $6.5 M in ETH in less than 48 hours.<\/p>\n
It has been plagued with problems since its inception, with the initial sale riddled with swap errors and scammers capitalizing on the confusion. The DMM team had initially described the platform\u2019s closure as the \u201cresult of regulatory inquiries.”<\/p>\n
Trenchant cryptocurrency critic and admin of the Buttcoin subreddit David Gerard said in a post the action shows the SEC is indeed ramping up efforts to prosecute DeFi-related projects based in the U.S. <\/p>\n
He argues this is because \u201cDeFi is pretty blatantly a security in the U.S.\u201d and that related tokens fit the criteria of a security as defined by the Howey Test. Gerard points to previous administrative orders by the SEC, in which an ICO was deemed to constitute sales of unregistered securities, as the \u201ctemplate\u201d for future prosecution efforts.<\/p>\n
While the action is concerning, DeFi projects that have more fully decentralized governance may be viewed differently and it remains to be seen how regulators and courts will approach such projects.<\/p>\n
Several other non-DeFi cryptocurrency projects have been unfortunate enough to have been targeted by the SEC recently. <\/p>\n
On Jan. 24, a New York district court ruled in favor of the SEC\u2019s motion for summary judgment against Kik Interactive, which raised approx. $100 million in token sales in 2017.<\/p>\n
In Dec. 2020, the SEC made public their lawsuit against Ripple, alleging its founders of raising $1.3 billion in the sales of unregistered securities.<\/p>\n
In Feb. 2020, the SEC filed charges against Steven Seagal for his role in promoting a 2018 ICO. <\/p>\n
And in New York, news emerged yesterday that the State Attorney General is suing crypto trading platform Coinseed for defrauding investors with its ICO under the Martin Act.<\/p>\n
While investment-related operations of the platform have been removed, DMM users can still access their accounts and redeem tokenized assets for their underlying counterparts.<\/p>\n
Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The SEC\u2019s recent inquiry into the Tim<\/p>\n","protected":false},"author":3,"featured_media":113486,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\n
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