DeFi project founders to pay over $12 million to settle SEC dispute

The founders of the DeFi Money Market project settled their dispute with the U.S. Securities and Exchange Commission (SEC). Gregory Kif and Derek Akri agreed to pay investors more than $12 million and to pay fines of $125,000 each.

According to the press release, from February 2020 to February 2021, Kif and Akri offered users unregistered securities in the form of mTokens and DMG tokens. In the regulator’s view, this raised assets valued at more than $31 million.

Holders of mTokens were promised investment returns of up to 6.25%. DMG were positioned as governance tokens for the DeFi-protocol.

The project operators guaranteed returns by reinvesting client funds into “real-world assets.” Subsequently, to redeem mTokens, reserves of Blockchain Credit Partners, also owned by the defendants, were used.

In February 2021, DeFi Money Market announced the closure due to regulatory issues. Representatives of the project noted that the issuance of mTokens had ceased, however redemption of tokens remained available at any time.

The SEC said the DeFi Money Market case was the first precedent in which the regulator held a DeFi project accountable. Commissioner Hester Peirce stressed that it was decentralized only in name.

Earlier, Peirce said that full decentralization since launch is the only hope for DeFi projects to avoid financial regulation.

As reported, SEC Chair Gary Gensler warned of heightened scrutiny in the decentralized finance and stablecoins.

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