SEC levies first-ever charge in the crypto space

The SEC has issued its first charges against people in the decentralized finance (DeFi) space.

SEC levies first-ever charge in the crypto space

 

Future. The SEC has issued its first charges against people in the decentralized finance (DeFi) space. While popular cryptocurrencies like Bitcoin still evade “security” classification (and SEC surveillance), the move signals intensifying scrutiny of crypto markets and of more regulations to come.

Cracking down 
The SEC charged two crypto exchange executives for misleading investors to raise $30M.

    • The agency is charging Blockchain Credit Partners’ executives for selling crypto-linked securities to investors while misleading them about their profitability.
    • The accused company allegedly promised holders up to 6.3% interest and claimed it would leverage funds to buy “real-world” assets, like car loans, to generate income.
    • The SEC determined, however, that the assets described couldn’t generate enough income to pay back the surge in value of investments made in tokens.
    • The agency subsequently charged the two men for using personal funds and for failing to notify investors of the change in business operations.

Blockchain Credit Partners didn’t confirm or deny charges, though it has agreed to a cease-and-desist order and will pay over $12.8 million in profits and $250,000 in penalties.

No more Wild West?

The charge occurs just days after Biden-appointed SEC Chairman Gary Gensler asked Congress for more oversight over crypto platforms in light of concerns that “a lot of people will be hurt.”

But does federal regulation undermine the fundamental value of a decentralized system?

Not necessarily, according to Gurbir S. Grewal, SEC Enforcement Division director, who thinks that “full and honest disclosure remains the cornerstone of our securities laws – no matter what technologies are used to offer and sell those securities.”