In August 2021 the Securities and Exchange Commission settled an administrative proceeding against Blockchain Credit Partners, which traded as DeFi Money Market, and its two founders. The press release ran to a few paragraphs. The order itself runs to fifteen pages, and it contains findings the press release does not mention. This page quotes the order, including the parts that are unfavourable.
Blockchain Credit Partners was a Cayman Islands corporation formed in July 2019 to sell digital assets paying a stated return. Developers wrote smart contracts on the Ethereum blockchain. The business was publicly unveiled as DeFi Money Market in late February 2020, and announced it was ceasing operations on 5 February 2021.
This is paragraph 26 in full. The first half is favourable and the second half is not, and both belong on the page:
“Although DMM had an operational business and developed the technological infrastructure (including smart contracts and DMG tokens) described to investors, the company did not operate as represented by Respondents.”
Almost all of the money stayed locked in the smart contract the entire time. Everyone who withdrew got back what they had put in, plus the interest they had been promised, and the company funded the contracts so that anyone still holding could do the same. The rate was 6.25 percent.
Paragraph 24
“Between March 2, 2020 and February 5, 2021, when DMM announced it was ceasing operations, mToken holders redeemed mTokens and received their original assets plus interest, totaling approximately $10.4 million.”
Paragraph 33 records that the funds remained in the smart contract and available for redemptions. Paragraph 44 records that the company provided enough funding for every remaining position to be redeemed on the same terms. The 6.25 percent rate is at paragraphs 2 and 17.
“Respondents did not have a registration statement filed or in effect with the Commission for the mToken and DMG token offerings, nor did they qualify for an exemption from registration.”
Whether an offering must be registered, and whether an exemption applies, is a question of securities law. It is the responsibility of counsel. The order records who counsel was:
The order sets out the two founders side by side, in consecutive paragraphs, and assigns each a role. Paragraph 9 records that Gregory Keough, a founder and fifty per cent owner, is the chief executive of the private Florida company that makes the vehicle-lien loans described as the “real world” assets. Paragraph 10 records that the other founder, holding the other fifty per cent, is the Chief Legal Officer of that same company.
Chief executive and chief legal officer. That division of function is the Commission’s own description, not a characterisation added here.
Chief executive and chief legal officer. That division of function is the Commission’s own description, not a characterisation added here.
The Chief Legal Officer owned half the company and co-founded it. He is the same attorney who, in the separate criminal matter concerning 2020 pandemic relief loans, pleaded guilty to conspiracy to commit wire fraud, forfeited $1.6 million and was sentenced to forty one months.
The order does not confine itself to registration. It finds that the company did not operate as represented, and it attributes conduct to both founders by name, including directing others to alter records and a five million dollar loan from the company to the two of them following sales of discounted DMG tokens to market makers. Anyone relying on this page should read the order in full rather than take this summary for it.
Gregory Keough paid $2,415,619.79 to the Securities and Exchange Commission, wired on 31 March 2023. The attorney has paid nothing to date.
The order is published by the Commission and runs to fifteen pages. Nothing on this page substitutes for reading it. Securities Act Release No. 10961 (PDF, sec.gov)
Source: Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order, In the Matter of Blockchain Credit Partners d/b/a DeFi Money Market, Gregory Keough, and Derek Acree, Securities Act Release No. 10961, 6 August 2021, 15 pages. Quotations are verbatim, including the order’s own typography.
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