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Smart Contracts For Dumb Investors

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August 10, 2021

The SEC has charged two Florida men and their Cayman Islands company, Blockchain Credit Partners, for “unregistered sales of more than $30 million of securities.” They are also charged with misleading investors concerning the operations and profitability of their business Defi Money Market. It is the SEC’s first Enforcement Action Involving Decentralized Finance, acronym “defi,” possibly because it defies description unless you’re familiar with smart contracts, mtokens and DMM governance tokens (DMG). The Florida men sold both forms of tokens, claiming that “Defi Money Market could pay the interest and profits because it would use investor assets to buy ‘real world’ assets that generated income, like car loans.” Apparently they came to the realization that “the price volatility of the digital assets used to purchase the tokens created risk that the income generated through income-generating assets would be insufficient to cover appreciation of investors’ principal.” Then they allegedly lied about it, and used cash from other companies they owned “to make principal and interest payments for mtoken redemptions.” The SEC shut the company down.

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