The U.S. Securities and Exchange Commission (SEC) recently announced that BarnBridge DAO, along with its founders Tyler Ward and Troy Murray, will pay over $1.7 million to settle charges related to the unregistered sale of structured crypto asset securities (SMART Yield). According to the SEC, they also unlawfully operated the SMART Yield pool as an unregistered investment company. As part of the settlement, BarnBridge will forego approximately $1.5 million in sales revenue, while Ward and Murray will each pay a civil penalty of $125,000.
Ward and Murray, per the SEC's order, promoted the investment potential and returns of SMART Yield through social media. They appeared on various decentralized finance-related YouTube channels, presenting SMART Yield as an investment opportunity. In July, BarnBridge's lawyer, Douglas Park, informed DAO members via Discord about the SEC investigation, advising a halt to all BarnBridge-related activities until further notice and suggesting no compensation should be paid to DAO members.
In October, a vote was initiated within the BarnBridge community to decide whether Ward and Murray should take necessary actions to comply with the SEC's orders. Shareholders were asked whether they should pay the required restitution and whether they should sell all tokens they were allowed to sell. The unanimous decision from the BarnBridge community was that "BarnBridge co-founders Tyler Ward and Troy Murray should comply with the U.S. SEC's orders."
Gurbir S. Grewal, Director of the SEC's Enforcement Division, emphasized, "Offering and selling structured financial products to retail investors using blockchain technology without registration violates securities laws." He reminded all entities entering capital markets, regardless of their corporate, decentralized, or autonomous nature, to adhere to relevant regulations.
According to the SEC's order, the defendants compared SMART Yield bonds to asset-backed securities and widely promoted them to the public. Investors could purchase "senior" or "junior" SMART Yield bonds through BarnBridge's website application. The SMART Yield pool aggregated crypto assets deposited by investors, providing fixed or variable returns. BarnBridge's white paper stated that SMART Yield bonds aimed to "mirror the safety and security offered by high-grade debt instruments in traditional finance while providing excess returns through its smart contract protocol." According to the SEC's order, SMART Yield attracted over $509 million in investments, charging fees to investors based on the investment size and returns.
While BarnBridge, Ward, and Murray did not publicly comment on the SEC's investigation results, they agreed to comply with the injunction under the 1933 Securities Act and the 1940 Investment Company Act registration provisions. The SEC's order also referenced remedial actions initiated by Ward and Murray.
