DeFi Platform Rari Capital Is SEC’s Latest Purge With Alleged Violations

Key Points:

• The SEC settled charges with DeFi platform Rari Capital for unregistered securities offerings involving its Earn and Fuse pools.
• Rari’s co-founders were accused of acting as unregistered brokers and misrepresenting the automatic rebalancing of investment pools.

The U.S. Securities and Exchange Commission said Wednesday it settled charges involving DeFi platform Rari Capital for allegedly failing to register securities.

Read more: Tensions Flare As SEC Vs Crypto Exchanges Debate Intensifies

SEC Settles Charges with DeFi Platform Rari Capital Over Unregistered Securities

As alleged in the complaint filed by the SEC, the Rari Capital Earn and Fuse Pools were crypto asset investment funds through which investors could deposit assets and earn returns. The defendants are alleged to have sold interests in those pools and associated governance tokens without registering, in violation of United States securities laws.

Monique C. Winkler, the director of the SEC’s San Francisco Regional Office, Rari Capital, together with co-founders Jai Bhavnani, Jack Lipstone, and David Lucid made misrepresentations to investors regarding the nature and profitability of the crypto-asset investment offerings on its platform. The firm, according to the complaint, allegedly acted as an unregistered broker.

DeFi platform Rari Capital had allegedly misrepresented how much a user could gain from its Earn pools, described as automatically rebalancing to optimize profit. According to the SEC, this is really a manual process, and the results aren’t always what’s advertised. Undisclosed fees caused many investors to lose a lot.

Crypto Crackdown Continues with Uniswap Facing Similar Scrutiny

The settlement has come as part of recent enforcement actions by the commission to rein in the crypto market. Co-founders of Rari Capital agreed to final judgments, including civil penalties, disgorgement, and five-year officer-and-director bars without admitting or denying charges. The complaint filed by the SEC was filed in the United States District Court for the Central District of California.

The SEC has charged several firms operating in the decentralized finance space as part of a wide-ranging crackdown on the crypto industry. Among them is Uniswap Labs, the creator of the Uniswap decentralized exchange. In May, the SEC issued Uniswap Labs a Wells Notice, charging the firm with operating as an unregistered securities exchange and broker-dealer.