Rari Governance Token

DeFi

when

Fuse

The U.S. Securities and Exchange Commission announced charges against decentralized finance platform Rari Capital and its co-founders, accusing them of misleading investors and acting as unregistered brokers.&nbsp; 
According to an SEC <a href="https://www.sec.gov/newsroom/press-releases/2024-138" target="_blank">release</a>, the charges involve two blockchain-based investment platforms that, at their peak, held over $1 billion in crypto assets. 
 You might also like: <a rel="" href="https://crypto.news/sec-and-ftx-auditor-prager-metis-settle-misconduct-case/"> Ripple’s Chris Larsen leads $10m investment in Yellow Network </a> 
<h2 class="wp-block-heading" id="unregistered-investments-and-misleading-claims">Unregistered investments and misleading claims</h2> 
Rari Capital and its founders—Jai Bhavnani, Jack Lipstone, and David Lucid—allegedly conducted unregistered securities offerings through these platforms. The <a href="https://crypto.news/tag/sec/" target="_blank">SEC</a> claims that Rari Capital offered two main investment products: the Earn pools and the Fuse pools. 
Both products allowed investors to deposit crypto into lending pools and earn returns. While the Earn pools were managed by Rari, the Fuse pools were user-created, according to the release. 
Investors received tokens representing their interests in these pools and, in some cases, governance tokens called Rari Governance Token (RGT), giving them the right to vote on platform decisions. 
The SEC alleges that Rari Capital falsely claimed the Earn pools would automatically rebalance into the highest-earning crypto investments. In reality, this process often required manual intervention, which was sometimes neglected, causing investors to lose money.&nbsp; 
Additionally, Rari is accused of promoting high returns without properly accounting for fees. Many investors in the Earn pools ultimately faced losses. 
 You might also like: <a rel="" href="https://crypto.news/new-nft-attack-why-the-sec-issued-a-750k-fine/"> New NFT attack: Why the SEC issued a $750k fine and what does a restaurant have to do with it </a> 
<h2 class="wp-block-heading" id="broader-implications-for-defi-regulation">Broader implications for DeFi regulation</h2> 
Rari Capital’s troubles show how even <a rel="" href="https://crypto.news/tag/DeFi">DeFi</a> platforms can fall under regulatory scrutiny. Although Rari presented itself as autonomous and decentralized, the SEC is treating it like any other financial entity offering investment products. 
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> 
 “We will not be deterred by someone labeling a product as “decentralized” and “autonomous,” but instead will look beyond the labels to the economic realities, as we did here, and hold the individuals behind crypto products and platforms accountable when they harm investors and violate the federal securities laws.” 
 Monique C. Winkler, Director of the SEC’s San Francisco Regional Office 
</blockquote> 
As part of the settlement, Rari Capital and its founders have agreed to civil penalties, including bans on serving as officers or directors for five years.&nbsp; 
Rari Capital Infrastructure, which took over operations from Rari in 2022, also settled with the SEC over similar charges. Neither Rari nor its founders admitted to the allegations, but they consented to the SEC’s terms.

SEC charges Rari Capital for misleading investors, unregistered activity

Table of Contents

crypto.news

Other articles published on Sep 18, 2024

RISE, the Gigagas Layer 2, announces its $3.2M Seed Round

Friend.Tech Faces Uncertain Future After Transferring Control of Smart Contracts

Cardano Ecosystem Expands With NIGHT Token Launch, ADA Price To Rally?

Anticipated FOMC Meeting and Its Impact on Crypto Markets

ParaFi Capital Chooses Avalanche for Tokenization of its $1.2B Fund

Michael Saylor's MicroStrategy to Issue $700M in Senior Convertible Notes to Buy More Bitcoin

Join our free newsletter for daily crypto updates!