Rari Capital: SEC Charges and Regulatory News Impacting DeFi
The SEC Charges Against Rari Capital
The US Securities and Exchange Commission (SEC) has charged Rari Capital, a decentralized finance (DeFi) protocol, and its executives for misleading investors and operating as unregistered brokers. The settlement includes various forms of relief, a capped ban, and a cease-and-desist order pending court approval.
Misleading Investor Practices
According to the filing, these charges relate to Rari Capital's actions that misled investors. The SEC claims Rari launched two investment products—earn pools and fuse pools—that functioned akin to cryptocurrency investment funds. At their peak, these products handled over $1 billion in crypto assets.
- The SEC alleges Rari deceived on earning pool returns, suggesting automatic asset rebalancing to enhance yield opportunities, yet requiring manual intervention that Rari often neglected.
- The promotion of extraordinarily high annual percentage yields (APY) attracted investors, but without disclosing certain fees led to losses for some participants.
Co-Founders and Regulatory Implications
The charges also implicate Rari Capital's co-founders: Jai Bhavnani, Jack Lipstone, and David Lucid. The SEC contends they engaged in unregistered broker activities. Furthermore, Rari Capital Infrastructure LLC, which gained control of the platform in 2022, is cited for offering unregistered securities and broker activities.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.