Fixed yield protocol BarnBridge DAO settles with SEC for $1.7M

The governing body for decentralized finance (DeFi) protocol BarnBridge has settled with the United States Securities and Exchange Commission (SEC) and agreed to stop the “unregistered offer and sale of structured finance crypto product,” according to a Dec. 22 announcement from the financial regulator. The agency has issued a cease and desist order as part of the enforcement action.

*Cease and desist order against BarnBirdge DAO. Source: SEC*

According to its current documents, BarnBridge allowed users to “earn a fixed return on their deposits by swapping variable APYs from money markets for a fixed APY.” The protocol’s governance token, BOND, was originally distributed as a reward for liquidity providers for Uniswap pools, according to the earliest archived version of the Barnbridge documents. Holders of the BOND token collectively form the BarnBridge decentralized autonomous organization (BarnBridge DAO), which is the respondent in the SEC enforcement action.

In its cease and desist order, the SEC claims that BarnBridge DAO and founders Tyler Ward and Troy Murray advertised “SMART Yield Bonds,” a structured investment product that paid investors a fixed rate of return from a pool of assets, called a “SMART Yield Investment Pool.” To earn the rate of return, the pools swapped investors’ assets for yield-bearing assets from “third-party lending platforms.”

The resulting revenue was then divided between “Senior” and “Junior” tranche investors. Senior investors were guaranteed a fixed rate of return, the SEC stated, while Junior investors were given a variable rate. If the rate of return was not high enough to pay out the full set of rewards for the Senior tranches, Junior tranche assets were used to compensate Senior investors.

On the other hand, if the rate of return was greater th

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Author: Tom Blackstone

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