SEC Settles with Rari Capital Over Unregistered Securities and Misleading Claims
TL;DR
- The SEC has settled with Rari Capital for operating as an unregistered broker and misleading investors about their DeFi offerings.
- Co-founders face fines and a five-year ban, while the SEC emphasizes increased scrutiny on decentralized finance platforms.
The U.S. Securities and Exchange Commission (SEC) has reached a settlement with Rari Capital, a decentralized finance (DeFi) lending platform, and its co-founders. The SEC charged Rari with operating as an unregistered broker and conducting unregistered securities offerings, highlighting the regulatory challenges faced by DeFi platforms in today's financial landscape. The co-founders misrepresented the investment pools and exaggerated potential yields, resulting in significant losses for investors.
Rari Capital provided investment opportunities through its Earn and Fuse pools, which the SEC likened to crypto asset investment funds. Allegations include selling interests in these pools and the Rari Governance Token without proper registration. The SEC stated that the co-founders misrepresented the Earn pools' operations, claiming automatic rebalancing for optimal yield when the process was actually manual and inconsistent.
As part of the settlement, Rari's co-founders agreed to pay fines and accepted a five-year ban from serving as officers or directors. Neither the co-founders nor Rari admitted to or denied the allegations. Additionally, Rari Capital Infrastructure, which took over operations in 2022, also settled charges related to unregistered securities and broker activities. SEC Director Monique Winkler emphasized the agency's commitment to scrutinizing DeFi products to ensure accountability for those behind crypto platforms that harm investors.
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