BarnBridge legal counsel recommended that DeFi protocols cease operations to limit their legal liability.
DeFi protocol BarnBridge said the U.S. Securities and Exchange Commission (SEC) is investigating its decentralized autonomous organization (DAO) and team members, according to a tweet on July 7.
In order to reduce the legal liability of the protocol, Douglas Park, the elected legal counsel of BarnBridge DAO, suggested that the protocol should stop creating new liquidity pools and close old liquidity pools.
Additionally, Park said all work on BarnBridge-related products should cease, adding that people will no longer be compensated for any work related to the agreement until further notice.
Parker noted that the SEC investigation is ongoing and nonpublic, which limits him from sharing more information.
According to its website, BarnBridge is a decentralized finance (DeFi) protocol that allows users to earn fixed returns on their crypto asset deposits. At its peak in November 2020, the total value of assets locked in the protocol was close to $600 million. However, according to Dellama data, this figure has since dropped to $1.35 million.
Meanwhile, BarnBridge’s BOND token is down nearly 9% to $3.01 at the time of writing, according to market data.
Community Criticism of the SEC
The crypto community has heavily criticized the SEC’s actions against the relatively unknown DeFi protocol.
AaveChan founder Marc Zeller said the financial regulator’s move sent the clearest signal yet that “it’s safer to be an offshore scammer than an honest builder with a U.S. passport.”
Crypto community members interpreted the SEC’s investigation into BarnBridge as a sign that regulators are not just looking at major organizations in the cryptocurrency space, but also questioning the possibility of forking the project without any untoward factors.
The SEC has stepped up its scrutiny of the crypto industry over the past month, filing legal actions against major crypto companies Coinbase and Binance. The regulator has flagged more than 60 cryptocurrency securities and highlighted instances of crypto companies not complying with existing securities laws.
