The Securities and Exchange Commission (SEC) has charged two men for their involvement in making millions from fraudulent offerings. The case has now been settled.
Two Florida men were charged by the SEC after it used a Cayman Islands company to illegally obtain $30 million. The case was a first for the SEC in the DeFi sector .
In an SEC press release, the agency said the pair, Gregory Keough and Derek Acree, are principals at Blockchain Credit Partners. The charges stemmed from two misrepresentations and the sale of $30 million in unregistered securities through smart contracts. Acree and Keough used the DeFi money market from February 2020 to February 2021 to sell the securities. The operation used two types of digital tokens
, mToken tokens and DMG tokens. Sponsored Sponsored
mTokens, which could be purchased using certain digital assets and which paid 6.25 percent interest, and DMG “management tokens.” They allegedly gave holders certain voting rights, a share of excess profits and the ability to profit from reselling DMG management tokens in the marketplace.
– the SEC stated.
because it used investors’ assets to buy ‘real world’ assets. They generated income, such as car loans.” After the DMM went public, the couple realized they couldn’t operate as promised. Price volatility created a risk that the income would not cover the core investment. Problems arose when the couple decided to omit this information from their correspondence with investors. She also lied about the company’s activities. To try to cover their tracks, Acree and Keough used a separate company along with private funds to try to pay interest on the mToken redemptions.
includes quotes from a number of people. Including the head of the Division of Complex Financial Instruments in the Division of Enforcement, Daniel Michael.
Federal securities laws apply with equal force to perennial scams involving cutting-edge technology. In this case, the designation of the offering as decentralized and the securities as management tokens did not prevent us from ensuring that DeFi’s money market was immediately closed and that investors withheld repayment.
Gurbir S. Grewal, director of the SEC Enforcement Division, added.
Full and fair disclosure remains the cornerstone of our securities laws. Regardless of what technologies are used to offer and sell these securities. This allows investors to make informed decisions and prevents issuers from misleading the public about business operations.
The press release concludes by sharing the case, which was settled by the defendant “without admitting or denying the findings in the SEC’s order.” The pair agreed to a cease and desist order that includes penalties of $125,000 each. And repayment of fraudulently obtained profits totaling nearly $13 million between the two.
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