BarnBridge DAO and founders settle SEC charges for unregistered crypto offerings

BarnBridge DAO, a decentralized autonomous organization in the crypto space, along with its founders, Tyler Ward and Troy Murray, has agreed to pay over $1.7 million to settle charges brought by the Securities and Exchange Commission (SEC). The charges relate to the failure to register the offer and sale of crypto asset securities known as SMART Yield bonds.

SEC allegations and settlement details

The SEC accused BarnBridge and its founders of not registering the “offer and sale of structured crypto asset securities known as SMART Yield bonds.” The DAO marketed these bonds as comparable to asset-backed securities, promoting them to the public. SMART Yield pools were utilized to consolidate cryptocurrencies from investors, generating returns to pay them.

Ward and Murray allegedly used social media and appeared on YouTube channels to endorse SMART Yield, highlighting its investment potential and returns. Despite the SEC’s findings, BarnBridge did not admit or deny the allegations.

As part of the settlement, BarnBridge agreed to disgorge nearly $1.5 million in proceeds from the sales. Additionally, both Ward and Murray will pay civil penalties of $125,000 each. The SEC emphasized that the unregistered offer and sale of structured finance products to retail investors through blockchain technology violates securities laws.

The SEC’s investigation into BarnBridge was revealed in July, prompting the DAO to halt work on related products. Later, a voting process was initiated to determine whether Ward and Murray should comply with the SEC’s order.

BarnBridge stakeholders were asked to decide on disgorgement payment and whether the DAO should sell permitted tokens, allowing Ward and Murray to distribute them. Notably, the SEC has previously taken legal action against decentralized autonomous organizations, reinforcing the applicability of securities laws to all entities accessing capital markets.

The SEC detailed that SMART Yield bonds were likened to asset-backed securities and broadly marketed to the public. Investors could purchase “Senior” or “Junior” SMART Yield bonds through BarnBridge’s website application. The crypto assets pooled through SMART Yield were used to generate fixed or variable returns, attracting over $509 million in investments.

BarnBridge’s white paper, authored by Ward, claimed that SMART Yield bonds would provide the safety and security of traditional highly-rated debt instruments while offering outsized returns through smart contract protocols.

Cease-and-desist orders and compliance

Without admitting guilt, BarnBridge, Ward, and Murray agreed to cease-and-desist orders, prohibiting violations of registration provisions under the Securities Act of 1933 and the Investment Company Act of 1940. The orders reference remedial actions initiated by the accused parties.

The SEC’s investigation was conducted by Lawrence Renbaum and Gregory Smolar of the Division of Enforcement’s Complex Financial Instruments Unit, under the supervision of Armita Cohen and Osman Nawaz, with assistance from the Crypto Assets and Cyber Unit.

In conclusion, the settlement underscores the SEC’s commitment to enforcing securities laws in the evolving landscape of decentralized finance. The case serves as a reminder that regardless of incorporation status, entities must adhere to regulatory requirements when accessing capital markets.

The post BarnBridge DAO and founders settle SEC charges for unregistered crypto offerings first appeared on Coinfea.