SEC makes the first DeFi settlement against Blockchain Credit Partners

  • Blockchain Credit Partners’ top executives have agreed to settle with the SEC after being charged with fraudulent offerings.
  • The DeFi company’s settlement is the first and may have set the path for the regulator to potentially settle with Ripple.

The Securities and Exchange Commission (SEC) has settled its very first case against decentralized finance platforms in the cryptocurrency industry. According to the case published on the agency’s website, the SEC made charges against the DeFi-lender Blockchain Credit Partners. Additionally, the watchdog charged the company’s top executives Gregory Keough and Derek Acree. Allegations were that they made fraudulent offerings, selling over $30 million in unregistered securities using smart contracts.

According to the SEC’s order, the accused sold unregistered offerings: mTokens and DMG governance tokens. The sale period through the DeFi Money Market lasted between Feb 2020 – Feb 2021. The SEC states that the now-defunct company sold the tokens without proper disclosure to investors. The digital assets were, for instance, sold despite price volatility. This generated a growing risk of imbalance between the generated income and the amount owed to investors.

SEC versus Blockchain Credit Partners settlement

The two Florida men did not admit or deny any wrongdoing but instead agreed to a settlement. Each of them is to surrender profits worth $12.85 million and an additional $125,000 in penalty fine. The charged parties also consented to a cease-and-desist order. More so, the DeFi platform has refunded all token investors by funding the smart contracts. mTokens investors are now able to redeem those tokens and receive all funds owed in terms of principal and interest.

The settlement comes shortly after SEC Chair Gary Gensler assured that the DeFi sector is subject to securities laws. His promise seems to be unfolding with time. Importantly, the DeFi market, which crypto investors use to borrow against their holdings has grown exponentially. DeFi collaterals have grown from $3 billion last year to a massive $85 billion this year. On the downside, fraudulent activities have increased with direct proportionality to increased DeFi setups. Frauds have cost investors about $83.4 million in the first quarter of this year alone.

Ripple case lawsuit overview

One of the most notable pending cases in the crypto sector is the SEC versus Ripple lawsuit. Similar to the above case, the SEC sued Ripple and its top executives for the sale of unregistered securities in the form of XRP. More recently, the CEO Brad Garlinghouse’s lawyers sought Binance’s help to argue that the SEC’s pursuit is outside its jurisdiction.

Read More: Ripple lawyers request Binance’s help against SEC lawsuit

The case is due to complete its pre-trial discovery on Oct. 15. It is likely, though, that the case will conclude in a pre-trial settlement. According to Financefeeds, 96 percent of all SEC cases are settled before trial. Out of these, 60 percent are before litigation and 90 percent in discovery. The Ripple case conclusion is awaited with bated breaths as it will set a significant precedent in the crypto space.

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