BarnBridge Settles With SEC Over Unregistered Crypto Financial Products
BarnBridge, a decentralized finance (DeFi) protocol, has reached a settlement with the United States Securities and Exchange Commission (SEC) after it was accused of conducting an unregistered offer and sale of cryptocurrency financial products. Following the agreement, BarnBridge has agreed to pay $1.4 million in disgorgement to the U.S. Treasury, and its founders, Tyler Ward and Troy Murray, will each pay a civil fine of $125,000. The SEC issued a cease-and-desist order against BarnBridge for issuing ‘SMART Yield Bonds’, a financial product that offered investors a fixed rate of return. This product used investors’ assets to generate returns from third-party lending platforms and divided the revenues among the investors of the ‘Senior’ and ‘Junior’ tranches. The SEC maintains that these investment pools are ‘Unregistered Investment Companies’ and, therefore, should have been registered with the agency. BarnBridge has reportedly ceased operations since July, following an SEC investigation. This case highlights the ongoing regulatory scrutiny over DeFi activities and the legal implications of offering investment products without proper registration.
Securities and Exchange Commission’s Stance
The SEC’s settlement with BarnBridge and its founders underscores the commitment to compliance and a collaborative approach to enable the growth and prosperity of the blockchain industry. The SEC announced a settlement agreement with BarnBridge and its founders over the sale of unregistered securities, imposing a substantial fine on the platform for selling SMART Yield securities. The entity agreed to pay over a million dollars in fines and agreed to resolve the allegations by refunding approximately $1.5 million of the revenue earned from the sales. The founders also agreed to pay individual fines of $125,000 each.
Implications for the DeFi industry
This case could potentially set a precedent for the DeFi industry, as it highlights the SEC’s broader stance on DeFi structures. Despite the settlement being an agreement and not a precedent-setting ruling, it raises doubts about the future of DeFi structures in the light of regulatory scrutiny. The details of the accusations suggest that the SEC is willing to extend its reach to DeFi structures, potentially impacting the development and growth of this burgeoning industry.
BarnBridge’s Response
BarnBridge, the DeFi protocol, has reached an agreement with the US SEC to halt the ‘unregistered offer and sale of structured crypto finance products’. The SEC contends that BarnBridge and the founders announced ‘SMART Yield Bonds’, a structured investment product that turned out to be an ‘Unregistered Investment Company’. As a result, the SEC has ordered BarnBridge to pay USD 1.4 million in restitution to the US Treasury, and the founders to each pay USD 125,000 in civil penalties. The organisation has been ordered to cease and desist from any further violation of the US securities laws.
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