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SEC Brings Its First Enforcement Action Against DeFi Project

Fri, 08/06/2021 - 14:12
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Alex Dovbnya
The SEC has settled charges it brought against a "decentralized" lender, which marks its first enforcement action against a DeFi protocol
SEC Brings Its First Enforcement Action Against DeFi Project
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The U.S. Securities and Exchange Commission has made an announcement about reaching a settlement agreement with decentralized finance project DeFi Money Market after charging it with a $30 million fraudulent offering.

Its operators, Derek Acree and Gregory Keough, allegedly defrauded investors by pitching them mTokens and DMG tokens that could be used to accrue interest with the help of real-world assets.

The business plan did not work out due to price fluctuations, something that operators chose not to disclose to buyers. Instead of buying car loans (as DeFi Money Market claimed), Acree and Keough funneled their own funds into the project to pay interest on mToken redemptions and keep the fraudulent scheme going.

It is worth noting that, although the two did own a company dealing with car loans, it had no connection to their DeFi endeavor.

The DMG governance token has a market cap of roughly $2.3 million, according to CoinGecko data.

Without admitting or denying the SEC's allegations, the respondents agreed to pay $12.8 million in disgorgement and a total of $300,000 in fines.

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The historic enforcement action came after SEC Chair Gary Gensler revealed that reining in decentralized finance was part of the agency's extensive cryptocurrency agenda.

However, Commissioner Hester Peirce jokingly described the project as "a DINO" (decentralized in name only). While being powered by smart contracts, its modus operandi definitely did not live up to the DeFi ethos.

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About the author

Alex Dovbnya (aka AlexMorris) is a cryptocurrency expert, trader and journalist with extensive experience of covering everything related to the burgeoning industry — from price analysis to Blockchain disruption. Alex authored more than 1,000 stories for U.Today, CryptoComes and other fintech media outlets. He’s particularly interested in regulatory trends around the globe that are shaping the future of digital assets, can be contacted at