The SEC’s case against the crypto DeFi firm Rari Capital is a clear warning that DeFi platforms offering unregistered securities and misleading investors will face regulatory consequences, regardless of their claims of autonomy or decentralization. Rari Capital offered two investment products, which functioned like crypto asset investment funds, allowing investors to deposit crypto assets in lending pools.
Key Points
- Rari Capital and its co-founders, Jai Bhavnani, Jack Lipstone, and David Lucid, have been charged by the SEC for misleading investors and acting as unregistered brokers.
- The charges relate to two crypto investment platforms that once held over $1 billion in assets.
- Rari Capital also conducted unregistered securities offerings tied to its crypto investment pools and governance token, RGT.
Short Narrative
The SEC has filed charges against the founders of Rari Capital, a DeFi platform, for misleading investors and engaging in unregistered broker activities. Rari offered two products, the Earn and Fuse pools, which functioned as crypto asset investment funds. Investors were promised high yields through these pools, but the SEC found that many investors actually lost money, while the automatic rebalancing of assets often required manual intervention, contrary to Rari’s claims.
Additionally, Rari Capital conducted unregistered offerings of its governance token (RGT) and sold interests in these pools without proper registration. The SEC has also charged Rari Capital Infrastructure LLC, which took over operations in 2022, for continuing these unregistered activities.
Compliance Insight
The case highlights how labeling a DeFi platform as “decentralized” or “autonomous” does not exempt it from U.S. securities laws. The SEC continues to scrutinize the economic realities behind crypto products, holding individuals and companies accountable for misleading investors and violating federal securities laws.
Call for Information
FinTelegram encourages insiders, compliance officers, and market participants to report any similar cases of unregistered broker activity or misleading practices in the crypto industry. Your insights can help protect investors and maintain the integrity of the DeFi space.
