Back in May 2019, Blockchain Credit Partners (BCP) announced the launch of the world’s first Tokenized High-Yield Private Credit Fund with a focus on providing consistent high-yield cash flow payments through lending against secured assets. The project was backed by US Assets, provides quarterly payments, and was endorsed by the Institute for Blockchain Innovation (IBI) and Blockchain, Fintech & Financial Services Leaders. Almost two years later, the fintech company has settled a $12 million dollar disgorgement after consenting to a cease-and-desist order from the U.S. Securities and Exchange Commission.
In An official press release issued by the SEC, executives of the firm made unregistered offerings through DeFi Money Market (DMM), a now-defunct protocol which once offered the “mToken” and DMG tokens.
The executives were identified as Gregory Keough and Derek Acree, with the SEC order finding that the two used smart contracts to sell two types of digital tokens: mTokens that could be purchased using specified digital assets and that paid 6.25 percent interest, and DMG “governance tokens” that purportedly gave holders certain voting rights, a share of excess profits, and the ability to profit from DMG governance token resales in the secondary market.
The SEC explained that its order found that the respondents (BCP & DMM) misrepresented how it operated through false claims on car loans to validate its financial status, details of which were posted on the now defunct DMM website. While the principal and interest payments for mToken redemptions were actually fulfilled, the source of funding for these were different from what the respondents claimed to be the actual source of funding, said the SEC.
Without admitting or denying the findings in the SEC’s order, respondents consented to a cease-and-desist order that includes disgorgement totaling $12,849,354 and penalties of $125,000 each for Keough and Acree.
In addition, prior to the issuance of this order, the respondents funded the smart contracts so that mToken holders could redeem their mTokens and receive all principal and interest owed.
