SEC settles with ‘DeFi’ operators for $30 million unregistered securities sale

On August 6, the Securities and Exchange Commission revealed settled charges against DeFi Money Market and operators Gregory Keough and Derek Acree. 

The SEC alleges that the pair sold over $31 million of mTokens and DMG tokens through DeFi Money Market. MTokens promised an ROI of over 6% based on investments in real-world assets, while DMG tokens were pitched as governance tokens. 

Those were, however, misrepresentations, per the order. Though Keough and Acree owned another business that held car loans, ownership of those loans never transferred to DeFi Money Market. That did not stop them allegedly using those assets to pay investors seeking to redeem mTokens.

The settlement requires Keough and Acree to pay investors $12,849,354 and penalties of $150,000 each, though the pair were not required to admit or deny wrongdoing.

This is the first time that the SEC has taken aim at a DeFi project, though it appears the actual operation was anything but decentralized. Ever since the boom in DeFi of last summer, all eyes have been on the SEC for indicators as to how they will handle the burgeoning field. Chairman Gary Gensler has spotlighted the need to rein in DeFi in recent speeches, while Commissioner Hester Peirce has argued in favor of a more hands-off regulatory approach. 

Peirce in fact took to Twitter to call DeFi Money Market DINO: “decentralized in name only.”

For comparison, the SEC’s early actions against initial coin offerings were against overt frauds, with the commission’s enforcements eventually tackling more refined issues and more legitimate operators.