A recent SEC study of the DeFi Money Market sponsored by Tim Draper is the latest example of the trend towards increased regulatory action against unlisted securities.
Join Kik Interactive, Ripple, and Coinseed as crypto ventures facing the regulator’s wrath over aspects of securities law.
The mystery of the sudden shutdown of the DeFi Money Market on February 5 was revealed on the project’s official Telegram channel on February 9 in a statement explaining that DeFi Money Market had received a subpoena from the US Securities and Exchange Commission on December 15, 2020..
“We have carefully considered the summons, and with the help of lawyers, we have begun to comply with the requirements of the law regarding the filing of documents and providing other information to the Securities and Exchange Commission,” the statement said.
“We started negotiations with the SEC staff to complete the investigation, and in an effort to find a mutually acceptable solution, we concluded that an orderly settlement of the project was the best.”
Without going into details, the statement also confirms that DeFi market investors’ assets – such as DAI, USDC, USDT or ETH – will be returned to clients “as soon as possible”.
The DeFi Money Market project was originally designed to provide traders and investors with access to real, coded assets. The public sale of DMG, the governance symbol used by the DMM DAO, ended in June 2020 after raising $ 6.5 million in ETH in less than 48 hours.
From the start, it had problems: the first sale was riddled with swap errors, and the scammers took advantage of the confusion. The DMM team initially described the closure of the platform as “a result of regulatory requests”.
David Gerrard, a Sharp cryptocurrency critic and author of Attack of the 50 Foot Blockchain, said in his letter that the proceedings show the SEC is upset by efforts to prosecute DeFi-related projects in the US.
He argues that this is because “DeFi is clearly valuable in the United States.” And that the associated tokens meet the security criteria defined by the Howey Test. Gerrard refers to previous SEC administrative orders in which the ICO was deemed to be a sale of unregistered securities as a “model” for future prosecutions.
While implementing the measure, DeFi projects with decentralized governance can be viewed in various ways, and it remains to be seen how regulators and courts will deal with such projects.
Unfortunately, the SEC has recently targeted several cryptocurrency projects other than DeFi.
On January 24, the New York District Court ruled in favor of the SEC recommendation for a summary ruling against Kik Interactive, which resulted in an approx. Token sales in 2017 totaled $ 100 million.
In December 2020, the SEC announced its lawsuit against Ripple, claiming that the founders had raised $ 1.3 billion from the sale of unregistered securities.
In February 2020, the Securities and Exchange Commission (SEC) indicted Steven Seagal for his role in promoting the 2018 ICO.
And yesterday in New York, news broke that the attorney general is suing cryptocurrency trading platform Coinseed for defrauding investors through an ICO according to Martin’s law.