The SEC also found that the respondents falsely claimed that DeFi Money Market could pay interest and profits to the holders of its digital tokens. They also falsely claimed that the company would use investors’ funds to purchase income-generating “real world” assets like car loans.
However, DeFi Money Market did not operate as promised to the holders of mTokens and DMG tokens. They failed to take into consideration the price volatility of the digital assets. Therefore, the company faced a significant risk that the income the real-world assets would generate is not sufficient to cover appreciation of investors’ principal.
Instead of informing investors about the problem, the respondents misrepresented how the company operates.
On February 5, 2021, the respondents announced their decision to shut down the operations of DeFi Money Market and voluntarily stopped offering and selling mTokens. The announcement resulted in a significant decline in the value of DMG tokens in the secondary market.
