The US SEC has filed a $30 million fraud charge against a DeFi project called Money Market and its two founders, Gregory Keough and Derek Acree. The project, in turn, was backed by Chainlink and its previously sponsored cryptocurrency investor Tim Draper.
SEC representatives said that the DeFi Money Market team managed to raise more than $30M in a year by trading two tokens based on the Ethereum cryptocurrency. One of them, mTokens, guaranteed its owners a 6.25% stake, and the second, DMG, was a “governance token” with a purpose similar to shares that give investors the right to vote in a company.
In reality, the cash holdings of Blockchain Credit Partners, which belonged to the leaders of the Money Market, were used to provide payments on mTokens, filed as profits obtained through reinvestment.
According to the SEC, when the founders of the project understood that they can't pay the assured reward to the investors, they deliberately distorted their company's investment strategy to smooth out the situation. But the regulator was much more concerned about the fact that DeFi Money Market didn't register any of its tokens officially, although they quite fell under the definition of "securities".
In a press release, the SEC noted that the Money Market will be the first case related to the DeFi industry to be forcibly prosecuted due to the $30M received from the placement of unregistered securities from February 2020 to February 2021.
As a result, to resolve the conflict with the SEC, the founders of the DeFi project agreed to pay $125,000 in fines awarded to each of them and return more than $12.8 million to their investors.