The decentralized finance (DeFi) protocol BarnBridge has reached a settlement with the United States Securities and Exchange Commission (SEC) after being accused of conducting an unregistered sale of structured finance crypto products. As part of the settlement, BarnBridge has agreed to cease the offer and sale of these products.
BarnBridge allowed users to earn a fixed return on their deposits by swapping variable APYs from money markets for a fixed APY. The protocol’s governance token, BOND, was initially distributed as a reward for liquidity providers for Uniswap pools. The holders of the BOND token collectively form the BarnBridge decentralized autonomous organization (BarnBridge DAO), which is the subject of the SEC enforcement action.
The SEC claims that BarnBridge DAO and its founders, Tyler Ward and Troy Murray, advertised “SMART Yield Bonds,” a structured investment product that offered investors a fixed rate of return from a pool of assets known as a “SMART Yield Investment Pool.” The pools would swap investors’ assets for yield-bearing assets from third-party lending platforms to generate revenue.
The revenue generated would be divided between “Senior” and “Junior” tranche investors. Senior investors were guaranteed a fixed rate of return, while Junior investors received a variable rate. If the rate of return was insufficient to pay the full rewards for the Senior tranches, Junior tranche assets would be used to compensate Senior investors. Conversely, if the rate of return exceeded the needs of Senior investors, the excess revenue would be given to Junior tranche investors.
BarnBridge DAO charged SMART Yield Bond investors a 5% fee on their profits, which was deposited into a smart contract called the “BarnBridge DAO Treasury.” These funds were then used to cover various business costs, including transaction fees, website hosting fees, programmer contracts, and the salaries of Ward and Murray.
The SEC argues that the SMART Yield Investment Pools are “Unregistered Investment Companies” and therefore should have been registered with the agency. Additionally, the SEC claims that BarnBridge DAO, as the operator of these pools, was responsible for carrying out the necessary registration.
As part of the settlement, BarnBridge DAO has been ordered to pay a $1.4 million disgorgement to the U.S. Treasury, using funds from its treasury. Ward and Murray have each been fined $125,000 in civil penalties. The DAO has also been instructed to cease any further violations of U.S. securities laws.
BarnBridge has been inactive since July 6, following the announcement that the DAO was under investigation by the SEC. In October, Ward publicly acknowledged that the SEC had issued an order against the DAO, and the DAO subsequently authorized Ward, Murray, and their attorney to comply with the order.
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | North America |
| Countries | 🇺🇸 |
| Sentiment | neutral |
| Relevance Score | 1 |
| People | Douglas Park, Troy Murray, Tyler Ward |
| Companies | United States Securities and Exchange Commission (SEC), Uniswap, BarnBridge, U.S. Investment Company Act, Discord |
| Currencies | None |
| Securities | None |
