The Securities and Exchange Commission (SEC) has reached a settlement with BarnBridge DAO, a decentralized finance (DeFi) protocol, and its founders, Tyler Ward and Troy Murray, involving a payment exceeding $1.7 million. This resolution follows the SEC's allegations of the entity's failure to register the sale and offering of cryptocurrency-based structured securities known as SMART Yield bonds, according to The Block report.
In its statement, the SEC revealed that BarnBridge, along with its founders, inadequately registered these SMART Yield bonds, presenting them as asset-backed securities without proper registration to the public. Despite BarnBridge not explicitly admitting or denying the SEC's findings, the DAO effectively accumulated cryptocurrencies from investors through SMART Yield, utilizing these funds to generate returns for investors.
The SEC's order detailed the promotional activities of Ward and Murray, who actively endorsed the investment potential and returns associated with SMART Yield through various social media channels and guest appearances on YouTube interview platforms dedicated to decentralized finance.
The SEC investigation became apparent in July when Douglas Park, BarnBridge's attorney, alerted DAO members via Discord about the ongoing SEC scrutiny. Park advised halting all activities related to BarnBridge products and refraining from compensating individuals working for the DAO.
Gurbir S. Grewal, the SEC's Director of Enforcement, emphasized the application of securities laws to entities engaging in the sale of structured finance products to retail investors via blockchain technology. Regardless of an entity's structure, compliance with securities laws remains pivotal for market access, Grewal stated.
This enforcement action against BarnBridge aligns with previous SEC actions targeting decentralized autonomous organizations (DAOs). Earlier this year, the SEC made similar allegations against American Crypto Fed, citing failures in providing necessary business management information, financial disclosures, and misleading statements about the nature of their tokens.