The SEC alleges that between February 2020 and February 2021, two executives of Blockchain Credit Partners used smart contracts and so-called “decentralized finance” (DeFi) technology to sell two types of cryptocurrencies while offering misleading information to investors about the operations and profitability of their business.
According to the SEC, the company told investors that they could receive 6.3 percent interest from the investment. At the time, Blockchain Credit claimed that investor funds could be used to buy “real world assets that generated income,” such as car loans.
The SEC’s order claims that it was impossible for that model to operate as promised, however, as real-world assets would not be able to generate enough income to pay back the surging value of investments made from tokens such as ether. Even though the company was aware of these issues, the SEC said, it did not inform investors accordingly.
“Full and honest disclosure remains the cornerstone of our securities laws – no matter what technologies are used to offer and sell those securities,” said Gurbir S. Grewal, the director of the SEC’s enforcement division, in a statement. “This allows investors to make informed decisions and prevents issuers from misleading the public about business operations.”
Blockchain Credit and its executives Gregory Keough and Derek Acree did not admit or deny the findings in the SEC’s order but have agreed to pay back approximately $13 million in disgorgements and penalties of $125,000 each. 