The US Securities and Exchange Commission (SEC) accused the DeFi Money Market project of an unregistered sale of $ 30 million in securities and of providing investors with false information.
According to the SEC, two Florida residents, Gregory Keough and Derek Acree, and their firm Blockchain Credit Partners, were selling unregistered securities through the DeFi Money Market between February 2020 and February 2021.
To do this, they used two types of tokens: mTokens, which could be bought for certain cryptocurrencies, and on which interest in the amount of 6.25% was to be paid, as well as DMG tokens, which allegedly endowed their holders with voting rights, a share of excess profits and the possibility of receiving profits from the resale of DMG in the secondary market.
The defendants argued that in the sale of mTokens and DMG, DeFi Money Market could pay interest and profits, using investor funds to buy “real” income-generating assets such as car loans. It later turned out that the DeFi Money Market could not work as it was announced to investors. Due to the volatility of the crypto assets used to buy tokens, the income received was not enough to cover the investments of investors.
The SEC claims that the defendants provided buyers with false information and misrepresented the facts, claiming that DeFi Money Market acquired auto loans listed on this site. Although the defendants owned another car loan firm, ownership of them never passed to DeFi Money Market. To pay the principal and interest on investments in mToken, they used personal funds and funds of another company under their control.
The regulator requires Kio and Akri to return $ 12.8 million to investors and pay a $ 125,000 fine each. The defendants did not admit or deny wrongdoing, and the DeFi Money Market was terminated.
“Full and fair disclosure remains the cornerstone of securities laws, no matter what technology is used to sell them. Cryptocurrency firms must not mislead investors so they can make an informed decision, ”said SEC Enforcement Director Gurbir S. Grewal.
Last year, DeFi Money Market announced a partnership with Chainlink to create a “bridge” between Ethereum-based decentralized finance and real-world assets.
