The United States Securities and Exchange Commission (SEC) announced Wednesday that it has reached an agreement to settle previously unannounced charges against Rari Capital, a decentralized finance (DeFi) platform.
The regulator alleged that Rari Capital and co-founders Jai Bhavnani, Jack Lipstone, and David Lucid misled investors and that the platform served as an unregistered broker. Rari Capital's platforms held more than $1 billion worth of assets at one point, the SEC said.
“We allege that Rari Capital and its co-founders misled investors about both the features and profitability of certain of the crypto asset investments Rari Capital offered, and acted as unregistered brokers,” said Monique C. Winkler, Director of the SEC’s San Francisco Regional Office, in a release.
“We will not be deterred by someone labeling a product as 'decentralized' and 'autonomous,'" she continued, "but instead will look beyond the labels to the economic realities, as we did here, and hold the individuals behind crypto products and platforms accountable when they harm investors and violate the federal securities laws.”
FTX Auditor Prager Metis Settles SEC Charges Over 'Negligence'
The U.S. Securities and Exchange Commission (SEC) announced Tuesday that FTX’s former auditor, Prager Metis, has reached a $1.95 million settlement with the regulator. The agreement resolves allegations of negligence-based fraud stemming from Prager Metis’ relationship with the collapsed crypto exchange. At the same time, the agreement covers alleged violations of auditor independence rules dating back as early as 2017. Per the regulator, a $745,000 civil penalty applies to the FTX violations, w...
The SEC’s case against Rari parallels previous actions against other crypto firms, in that it struck at the heart of a novel sector—here, DeFi—while also carefully selecting a target that appears to have egregiously violated standard business practices.
Here, for example, the SEC alleged that Rari claimed to run automated earn pools that instead were run manually in secret, and that the company sometimes failed to operate. The agency also accused Rari of advertising a certain yield percentage for earn pool users that often turned out to be inaccurate, and said the earn pools sometimes lost users' money.
Let Americans Have Their Crypto Airdrops, Lawmakers Tell Gary Gensler
In a letter to the U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler, Representative Tom Emmer (R-MN)—the House Majority Whip—expressed concerns about how the regulator views crypto airdrops under the lens of securities law. In the letter, co-signed by Chairman of the House Committee on Financial Services Patrick McHenry (R-NC), Emmer pointed to a lack of regulatory framework in the United States regarding digital assets as the reason why Americans are blocked from claiming airdro...
Rari Capital and the founders did not admit or deny the SEC's allegations, but agreed to various penalties including "permanent injunctions, conduct-based injunctions, civil penalties, disgorgement with prejudgment interest, and equitable officer-and-director bars against the co-founders for a period of five years." Furthermore, Rari Capital Infrastructure agreed to a cease-and-desist order as part of the settlement.
But today’s settled charges, crucially, also include language that applies to most DeFi protocols, regardless of their business practices. The SEC’s action categorized two types of tokens commonly used by DeFi projects, here used by Rari—a protocol-specific token issued to represent stakes in token pools, and a governance token offering holders a say in the operation of the platform—as illegally unregistered securities.
Donald Trump Launches World Liberty Financial, Team Unveils Token Details
Just one day after surviving a second assassination attempt, Donald Trump today launched his long-rumored crypto project, World Liberty Financial. Though much about the project remains unclear, the team behind World Liberty Financial unveiled previously unconfirmed details during a live interview with Rug Radio, Decrypt’s sister company. The project will offer borrowing and lending services for cryptocurrencies on the Ethereum blockchain network, not unlike the vast array of existing application...
Earlier this year, the major U.S.-based DeFi protocol Uniswap revealed that it had received notice of an impending SEC lawsuit.
The latest SEC action came less than two days after former president Donald Trump and his business partners publicly announced that their upcoming DeFi platform, World Liberty Financial, will soon begin offering sales of a governance token, though one that will be non-transferable.
Edited by Andrew Hayward
Editor's note: This story was updated after publication with additional details.
