The U.S. Securities and Exchange Commission (SEC) has settled with decentralized finance (DeFi) protocol Rari Capital and its founders over allegations of deceptive brokerage and unregistered brokerage.
The SEC said Rari Capitalâs Earn and Fuse pools operated like cryptocurrency investment funds, with investors earning returns by investing their crypto assets in these pools. The complaint alleges that Rari Capital engaged in unregistered securities offerings and sales by selling interests in these pools and governance tokens.
The SEC also alleges that Rari Capital and its founders misled investors that the Earn pools would automatically and autonomously rebalance to provide the best returns. In reality, this mechanism often required manual intervention, and Rari Capital sometimes failed to do so.
Rari Capital and its founders are also accused of operating unregistered brokerage through the Fuse platform. The initial settlement includes a variety of reliefs, including permanent injunctions, civil penalties, repayment with interest, and a five-year ban on founders from serving as directors. The settlements are subject to court approval.
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