SEC Charges Decentralized Finance Lender for Raising $30M(sec.gov)

SEC Charges Decentralized Finance Lender for Raising $30M

https://www.sec.gov/news/press-release/2021-145

6 comments

According to the order, in offering and selling mTokens and DMG governance tokens, the respondents stated that DeFi Money Market could pay the interest and profits because it would use investor assets to buy “real world” assets that generated income, like car loans. However, the order finds that after publicly unveiling DMM, the respondents realized that DeFi Money Market could not operate as promised because the price volatility of the digital assets used to purchase the tokens created risk that the income generated through income-generating assets would be insufficient to cover appreciation of investors’ principal. The order finds that rather than notifying investors of this roadblock, the respondents misrepresented how the company was operating, including by falsely claiming that DeFi Money Market had bought car loans that they displayed on DeFi Money Market’s website. While the respondents controlled another company that owned car loans, DeFi Money Market never acquired an ownership interest in any of those loans. Instead, the order finds that the respondents used personal funds and funds from the other company they controlled to make principal and interest payments for mToken redemptions...

...Without admitting or denying the findings in the SEC’s order, respondents consented to a cease-and-desist order that includes disgorgement totaling $12,849,354 and penalties of $125,000 each for Keough and Acree. In addition, prior to the issuance of this order, the respondents funded the smart contracts so that mToken holders could redeem their mTokens and receive all principal and interest owed.

So if I understand correctly this is an example of enforcement gone right? Nobody actually lost money because the two were forced to close up shop and return all money owed BEFORE the whole operation could implode? Good job SEC, I feel like they never get any credit when things go right.

d--b5 anni fa

SEC Charges Decentralized Finance Lender for Raising $30M Through Fraudulent Offerings

[deleted]5 anni fa

(1)

kova125 anni fa

SEC charges hacker news poster for deceitful title

[deleted]5 anni fa

Taek5 anni fa

Unfortunately there's an 80 character limit for the titles. I had to pull a few key items out. I figured that because the first word was 'SEC', "fraudulent offerings" would be implied.

menzoic5 anni fa

Why did you leave out "Through Fraudulent Offerings" that was in the original title?

dcminter5 anni fa

Probably because it would have been too long for the character limit.

tw045 anni fa

But that’s kind of the most important part… if it was too long they probably should’ve just said they were charged for fraud.

“SEC charges decentralized finance lender for fraud”

Taek5 anni fa

I was hoping that because SEC was already in the title, fraud would be implied. They don't really tend to get involved for any other reason. Not at all my intention to editorialize or be deceitful, I made a good faith effort at removing the ~50% of characters that were least important to the content.

dcminter5 anni fa

I agree, but the 'don't editorialize' policy conflicts with the character limit so sometimes people truncate at a convenient point instead of rephrasing.

driverdan5 anni fa

More info about them:

Their old website: https://web.archive.org/web/20200502073947/https://www.block...

One of their PRs with a lot of info: https://apnews.com/press-release/pr-businesswire/925f8eefafd...

scottrepreneur5 anni fa

This is DeFi in name only.

davidgerard5 anni fa

almost everything that was and still is marketed as "DeFi" is "decentralised" in name only - this is otherwise typical of VC-backed defi.

jl27185 anni fa

I agree. It happened to the Internet. It’s happening with crypto. Is it possible to win against big money? Bitcoin gave us a lot of hope in the beginning, like BBSs and newsgroups.

IfOnlyYouKnew5 anni fa

It reads like the textbook description of a scam. All one is left wondering is how they ever thought they'd get away with it, and maybe how people will claim this is the SEC "just not getting" technology and/or trying suppress competition to USD.

jl27185 anni fa

I’m usually that guy. I applaud this action as a tiny step in roughly the right direction. If defi users are paying taxes on risky profits, they deserve total protection from fraudulent losses. The tax code is already massively asymmetric (unlimited tax on gains, $3000 max loss deduction).

Personally I don’t think comprehensive fraud enforcement is possible or efficient, and a risk-friendly tax code (lifetime profit/loss) would probably make more sense. But still, this is better than nothing.