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. While the respondents controlled another company that owned car loans, DeFi Money Market never acquired an ownership interest in any of those loans.
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. 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 they used smart contracts to sell two types of digital tokens: mTokens that could be purchased using specified digital assets and that paid 6.25 percent interest, and DMG “governance tokens” that purportedly gave holders certain voting rights, a share of excess profits, and the ability to profit from DMG governance token resales in the secondary market.Īccording 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. The Securities and Exchange Commission today charged two Florida men and their Cayman Islands company for unregistered sales of more than $30 million of securities using smart contracts and so-called “decentralized finance” (DeFi) technology, and for misleading investors concerning the operations and profitability of their business DeFi Money Market.Īccording to the SEC’s order, Gregory Keough, Derek Acree, and their company Blockchain Credit Partners offered and sold securities in unregistered offerings through DeFi Money Market from February 2020 to February 2021.
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