A DeFi protocol has caught the attention of the Securities and Exchange Commission (SEC). As of Thursday, Barnbridge DAO has had to cease all operations. After hitting the big centralized players, is the SEC now turning its attention to DeFi?

In a statement on its official Discord, Barnbridge DAO announced that the SEC was currently investigating the protocol and “individuals associated with [it].” As a result, the DAO announced it would be closing all liquidity pools and halting the creation of any more. Moreover, all work on Barnbridge-related products must stop. Individuals working with the DAO will no longer be compensated until further notice.

Douglas Park, the project’s legal counsel, confirmed that there was only a limited amount of information that could be shared publicly. Co-founders Tyler Ward and Troy Murray will not comment on the ongoing situation.

Learn more about how the US Securities and Exchange Commission defines a security: What Is the Howey Test and How Does It Impact Crypto?

Not everyone took the news at face value, however. One member of the Discord asked for proof of the SEC’s investigation and speculated about whether it was a ruse for the founders to elope with the DAO’s funds.

However, Ward pushed back quickly, saying it would be the “worst thought-out rug attempt in history.” Lying about a federal investigation in such a public manner is highly illegal.

Barnbridge’s native token, BOND, fell around 8.7% following the news. Dropping from approximately $3.30 to $3.01 in three hours and twenty minutes, according to CoinMarketCap.

While it is not known why the SEC began its investigation, it is not the first time the regulator has swiped at DeFi projects. In March of this year, the agency handed Sushi DAO, the maker of the Ethereum-based decentralized exchange SushiSwap, a subpoena. 

The recent investigation suggests that the SEC may be turning its attention to smaller, DeFi projects in its enforcement efforts. The emergence of DAOs, which are governed by smart contracts and community votes, has complicated the legal landscape immeasurably.

Although, the SEC is unlikely to defeat the legal firepower of the likes of Coinbase, a centralized exchange, which has the funds and will to take any legal action to the very end.

This year, the chief financial watchdog has pursued several crypto firms for breaking securities laws. On June 5 and 6, the SEC filed complaints against Binance and Coinbase, respectively.

The latter are the two largest crypto exchanges by trading volume. Their legal battles mark the bitterest chapter of the SEC’s war on the industry. Both deny any wrongdoing.

The post This DeFi Protocol Was Forced to Halt Operations by the US Watchdog appeared first on BeInCrypto.

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