The U.S. Securities and Exchange Commission settled charges it made against DeFi platform Rari Capital, Inc. after finding that the firm and its co-founders mislead investors and were not registered properly as brokers.
Rari Capital co-founders Jai Bhavnani, Jack Lipstone and David Lucid told investors that its Earn and Fuse pools, which allowed investors to deposit crypto in “lending pools,” would “automatically and autonomously rebalance” their crypto, when instead this was done manually, which the firm sometimes failed to do, the SEC said. They also were involved in “unregistered broker activity,” the SEC said.
The agency claims there was more than $1 billion worth of assets locked up in Rari's pools.
“We allege that Rari Capital and its co-founders misled investors about both the features and profitability of certain of the crypto asset investments Rari Capital offered, and acted as unregistered brokers,” said Monique C. Winkler, director of the SEC's San Francisco Regional Office in a statement. “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.”
The SEC has charged multiple crypto firms over the years, including centralized exchanges. The agency has also more recently pursued DeFi platforms. In May, Uniswap Labs, the developer of the decentralized exchange Uniswap, said it received a Wells Notice from the SEC. The agency said that Uniswap Labs acted as an unregistered securities exchange and unregistered broker-dealer, according to the firm.
Rari Capital and its co-founders did not admit or deny the SEC's findings.
The story will be updated.