The
U.S.
Securities
and
Exchange
Commission
settled
charges
with
decentralized
finance
lending
platform
Rari
Capital
and
its
co-founders,
alleging
that
it
operated
as
an
unregistered
broker,
offered
unregistered
securities
offerings
and
misled
investors.
Jai
Bhavnani,
Jack
Lipstone
and
David
Lucid,
the
platform’s
co-founders,
also
settled
charges
with
the
SEC,
the
regulator
announced
Wednesday.
Rari
offered
Earn
and
Fuse
pools,
“which
functioned
like
crypto
asset
investment
funds.”
It
violated
federal
securities
law
by
selling
interests
in
both
pools
and
selling
the
Rari
Governance
Token,
the
SEC
alleged.
Rari’s
co-founders
told
their
investors
that
the
Earn
pools
automatically
rebalanced
its
holdings
“into
the
highest
yield-generating
opportunities,”
but
this
process
was
actually
manual
and
Rari
did
not
always
rebalance
the
pools,
the
SEC
said.
“The
SEC
also
alleges
that
Rari
Capital
and
its
co-founders
misleadingly
touted
the
high
annual
percentage
yield
that
investors
would
earn,
but
they
failed
to
account
for
various
fees
and,
ultimately,
a
significant
percentage
of
Earn
pool
investors
lost
money
on
their
investments,”
the
agency
said
in
a
release.
Rari
offered
unregistered
broker
services
through
the
Fuse
platform,
the
SEC
alleged.
As
part
of
their
settlement,
Rari’s
co-founders
agreed
to
fines
and
five-year
officer-and-director
bans,
though
these
are
subject
to
court
approval.
Neither
the
co-founders
nor
Rari
admitted
or
denied
the
allegations
in
the
settlement
agreement,
which
is
standard.
Rari
Capital
Infrastructure,
which
the
SEC
said
took
over
from
Rari
in
2022,
also
settled
unregistered
securities
and
broker
charges,
agreeing
to
a
cease-and-desist
order.
“We
will
not
be
deterred
by
someone
labeling
a
product
as
‘decentralized’
and
‘autonomous,’
but
instead
will
look
beyond
the
labels
to
the
economic
realities,
as
we
did
here,
and
hold
the
individuals
behind
crypto
products
and
platforms
accountable
when
they
harm
investors
and
violate
the
federal
securities
laws,”
said
SEC
San
Francisco
Regional
Office
Director
Monique
Winkler
in
a
statement.
