SEC Settles with DeFi Platform Rari Capital Over Misleading Investors

According to The Block, the U.S. Securities and Exchange Commission (SEC) has reached a settlement with DeFi platform Rari Capital over allegations that the company and its co-founders misled investors and failed to register as brokers. The SEC stated that Rari Capital co-founders Jai Bhavnani, Jack Lipstone, and David Lucid told investors that its Earn platform, which allowed users to lend tokens to earn interest, would "automatically and autonomously rebalance" their cryptocurrency, rather than doing so manually. However, the company was sometimes unable to achieve this. The SEC also stated that they engaged in "unregistered broker-dealer activity" related to the Fuse platform. The SEC said the two platforms held over $1 billion in cryptocurrency assets at their peak. Investors in certain Earn platforms were also eligible to receive Rari governance tokens, which the agency alleges was an unregistered security.

As part of the settlement, Rari Capital Infrastructure LLC, which acquired Rari Capital in 2022, agreed to cease future violations of securities laws. Rari's co-founders agreed to pay fines and are barred from serving as executives and directors for five years. Previously, the lending platform Fuse was hacked in May 2022, with $80 million stolen. Rari Capital subsequently halted new deposits and began phasing out the Fuse platform.