BarnBridge DAO Goes Into Shutdown Over SEC Investigation

Updated: 07 July 2023

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Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

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What: BarnBridge DAO has halted its operations and closed its liquidity pools.
Why: The decentralized platform is being investigated by the U.S. Securities and Exchange Commission for unknown reasons.
What Next: Investors wait to see what issues the SEC has against Barnbridge and how the issue will pan out.

The United States Securities and Exchange Commission (SEC) is reportedly investigating BarnBridge DAO, causing the project to pause all work and close liquidity pools.

BarnBridge’s lawyer Douglas Park first mentioned this on the company’s Discord channel, stating that in order to reduce potential further legal liability, existing liquidity pools should be closed and no more liquidity pools should be started.

Park stated that all work on BarnBridge-related products should stop and individuals should no longer be compensated until further notice, without mentioning the reason why the regulator launched a probe, saying that the investigation is a non-public matter.

pic.twitter.com/ChsjBuGEzM
— BarnBridge (@Barn_Bridge) July 7, 2023

BarnBridge is an open-source, cross-platform risk management decentralized finance protocol that attempts to tackle inflation risk and interest rate volatility. It was founded in 2019 and launched in 2020, allowing users to tokenize risks and create tradable tokens linked to market volatility.

Difficult legal framework

Decentralized Autonomous Organizations (DAOs) operate independently of centralized authority and are governed by smart contracts and community consensus. They are designed to be efficient and innovative but pose challenges to the authorities as they do not fall under an organized regulatory framework.

Analysts argue that by targeting small players who may not be able to sustain a long legal battle, the SEC could be seeking to set legal precedents for future legal battles in the crypto space.

Early in the year, it forced Kraken, a US-based crypto trading platform and custodian, to discontinue its Crypto “Asset Staking-as-Service” program in the US. The trading platform also paid $30 million in fines in a settlement with the SEC.

In June, the agency charged Coinbase for offering and selling unregistered securities in connection with its staking-as-service program. In the same month, U.S. financial watchdog accused the crypto exchange Binance and its founder Changpeng Zhao of operating a “web of deception,” charging him and the exchange with 13 offenses.

What next for BarnBridge?

In the past, cases brought by the regulator such as Binance and Coinbase have found their way into the public domain, where the SEC clearly explains the issues it has with the affected companies. This is not the case for BarnBridge.

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