BarnBridge DAO Agrees to Stop Unregistered Offer and Sale of Structured Finance Crypto Product
FOR IMMEDIATE RELEASE
Washington D.C., Dec. 22, 2023 —
The Securities and Exchange Commission today announced that BarnBridge DAO, a purportedly decentralized autonomous organization, and its two founders, Tyler Ward and Troy Murray, will pay more than $1.7 million to settle charges that they failed to register BarnBridge’s offer and sale of structured crypto asset securities known as SMART Yield bonds. The Commission also charged the respondents with violations stemming from operating BarnBridge’s SMART Yield pools as unregistered investment companies. To settle the SEC’s charges, BarnBridge agreed to disgorge nearly $1.5 million of proceeds from the sales, and Ward and Murray each agreed to pay a $125,000 civil penalties.
“The use of blockchain technology for the unregistered offer and sale of structured finance products to retail investors runs afoul of the securities laws," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "This case serves as an important reminder that those laws apply to all who wish to access our capital markets, regardless of whether they are, or purport to be, incorporated, decentralized or autonomous.”
According to the SEC’s orders, the respondents compared the SMART Yield bonds to asset-backed securities and marketed them broadly to the public. Investors could purchase “Senior” or “Junior” SMART Yield bonds through BarnBridge’s website application. SMART Yield pooled crypto assets deposited by the investors and used those assets to generate fixed or variable returns to pay investors. A BarnBridge white paper, published by Ward, claimed that SMART Yield bonds would “mirror the safety and security of highly-rated debt instruments offered by traditional finance…while still providing the outsized return” through its smart contract protocols. According to the orders, SMART Yield attracted more than $509 million in investments from investors, and BarnBridge was paid fees by the investors based on the size of their investment and their choice of yield.
Without admitting or denying the SEC’s findings, BarnBridge, Ward, and Murray agreed to cease-and-desist orders prohibiting them from violating and causing violations of the registration provisions of the Securities Act of 1933 and the Investment Company Act of 1940. The SEC orders reference remedial actions initiated by Ward and Murray.
The SEC’s investigation was conducted by Lawrence Renbaum and Gregory Smolar of the Division of Enforcement’s Complex Financial Instruments Unit, under the supervision of Armita Cohen and Osman Nawaz, and with the assistance of the Crypto Assets and Cyber Unit.