BarnBridge DAO and founders will pay $1.7M for Settlement with SEC Amid DeFi Scrutiny

BarnBridge DAO operated a protocol allowing users to swap variable annual percentage yields (APYs) from money markets for fixed APYs.

The governing body of a decentralized finance (DeFi) system, BarnBridge DAO, and the U.S. Securities and Exchange Commission (SEC) have reached a settlement. A $1.4 million disgorgement and $250,000 in civil penalties are part of this settlement for the founders.

Users might exchange variable annual percentage yields (APYs) from money markets for fixed APYs through the BarnBridge DAO protocol. The foundation of the company was built by the distribution of the protocol’s governance token, BOND, to liquidity providers in Uniswap pools.

But according to the SEC’s cease-and-desist order, BarnBridge and its owners, Troy Murray and Tyler Ward, advertised “SMART Yield Bonds.” These investment products engage in transactions with yield-bearing assets from third-party lending platforms, providing a fixed rate of return from a pool of assets.

Charges and revenue distribution

Junior investors received fluctuating rates, while senior investors were assured a stable rate. The 5% profit fee that investors in SMART Yield Bonds paid, which went toward funding the BarnBridge DAO Treasury, was brought to the attention of the SEC. The founders’ wages were one of the many business expenses that were paid for with these monies.

The U.S. Investment Company Act requires registration for the SMART Yield Investment Pools, which the SEC designated as “unregistered investment companies.” The enforcement action resulted from BarnBridge DAO’s failure to register, as they were believed to be the pool operator.

In the continuous discussion and legal examination of decentralized finance and its adherence to regulatory frameworks, this settlement represents a turning point. Now, negotiating these intricate legal environments will be critical to the survival of BarnBridge DAO and related DeFi companies.

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