SEC Charges “DeFi” Operators for Illegally Raising $30 million

Fazzaco learned that on August 6, the US Securities and Exchange Commission (SEC) revealed charges against DeFi Money Market and its operators Gregory Keough and Derek Acree, who have settled with the agency too.

According to the SEC, the two sold approximately $31 million in mTokens and DMG tokens through DeFi Money Market. MTokens offered a return on investment of over 6% based on real-world assets, whereas DMG tokens were marketed as governance tokens.

However, those were misrepresentations, as per the order. Despite the fact that Keough and Acree controlled another company that handled auto loans, the loans were never transferred to DeFi Money Market. That didn't stop them from allegedly utilizing those assets to compensate investors who wanted to cash out their mTokens.

Despite the fact that Keough and Acree were not forced to admit or deny wrongdoing, the settlement compels them to pay investors $12,849,354 and $150,000 in penalties each.

This is the first time that SEC has taken aim at a DeFi initiative, although it appears that the actual operation was anything but decentralized. Since last summer's DeFi explosion, all eyes have been on the SEC for clues as to how they would manage the booming industry.

"The federal securities laws apply with equal force to age-old frauds wrapped in today's latest technology," said Daniel Michael, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. "Here, the labeling of the offering as decentralized and the securities as governance tokens did not hinder us from ensuring that DeFi Money Market was immediately shut down and that investors were paid back."