BarnBridge DAO, a decentralized autonomous organization, and its founders, Tyler Ward, and Troy Murray, have agreed to pay over $1.7 million to settle charges brought by the Securities and Exchange Commission (SEC). The charges pertain to the failure to register the offer and sale of structured crypto asset securities, specifically the SMART Yield bonds, according to a statement by the SEC on Friday.
SMART yield bonds: Unregistered offer and SEC charges
The SEC alleged that BarnBridge and its founders failed to register the offer and sale of SMART Yield bonds, comparing them to asset-backed securities and marketing them extensively to the public. These bonds, operated through SMART Yield pools, pooled cryptocurrencies deposited by investors to generate returns for distribution. The SEC emphasized that Ward and Murray actively promoted SMART Yield through social media channels and appearances on YouTube interviews related to decentralized finance.
BarnBridge did not admit or deny the SEC’s findings but has agreed to settle the charges. The SEC contended that the use of blockchain technology for the unregistered offer and sale of structured finance products to retail investors violates securities laws.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “This case serves as an important reminder that those laws apply to all who wish to access our capital markets, regardless of whether they are, or purport to be, incorporated, decentralized, or autonomous.”
Settlement terms and actions taken by BarnBridge
As part of the settlement, BarnBridge agreed to disgorge nearly $1.5 million in proceeds from the sales, while Ward and Murray will each pay a $125,000 civil penalty. The SEC’s orders include cease-and-desist orders, prohibiting them from violating registration provisions outlined in the Securities Act of 1933 and the Investment Company Act of 1940. Investors who purchased “Senior” or “Junior” SMART Yield bonds through BarnBridge’s website application were affected.
The SEC has previously taken legal actions against DAOs. Earlier this year, the American Crypto Fed was accused of failing to provide the necessary information about its business management and financial condition. The SEC also found that the company made misleading statements and omissions, including inconsistencies regarding whether the tokens were classified as securities or not.
