Andre Cronje – a leading figure in DeFi – attributed the legal issues he faced with the US Securities and Exchange Commission to his decision to leave the industry in 2022.
Cronje wrote in his blog on Jan. 28 that his problems with the financial regulator started 2021 when he created Keep3r. Keep3r was a DeFi protocol that matched organizations with job seekers and professionals.
SEC Investigations
Cronje claims that at first, the SEC sought to learn more about Yearn Finance – a project Cronje launched in 2019. Yearn Finance, a leading DeFi lending aggregater at the time of its peak in 2020, had over $6 billion worth of deposits.
Cronje stated that the SEC’s investigation focused on potential ties to fundraising and investor activities. However, Cronje noted that the protocol hadn’t been followed. “raised no money, sold no tokens [and] did nothing that could be considered a breach in any countries securities laws.”
Then he added:
“I did not earn any fees from the protocol, I had no founder, team or any allocation, there was no financial benefit of the protocol for myself.”
Cronje still spent several weeks gathering the details requested by SEC. He often conducted research in order to locate the required information.
According to Cronje, at first he assumed that giving the data was enough. However, additional correspondence from the regulator signaled a shift in tone, prompting Cronje to seek legal assistance—a challenge given his lack of resources and legal connections.
He continued:
“As the letters kept flowing, it changed from ‘investigating’ the raise, and when it became apparent that was not an angle of attack it shifted to focusing on the yearn vaults themselves as ‘investment vehicles,’ since the vaults accept third party deposits, ‘does work,’ and then the depositors receive benefit from ‘the work of others.’”
Cronje, a non-US citizen with limited ties to the country’s markets, expressed confusion over the investigation’s scope.
Selon him, SEC’s inquiries consumed a lot of time and resources, which hindered his ability focus on innovations. Over the course of two years these demands increased, and he decided to abandon DeFi to avoid any further problems.
The writer wrote:
“After 2 years of needing to deal with this every month, and endless sleepless nights and stress. I chose [to step away]. I am sure many here would say I should have not buckled, but I also believe anyone that says that has never been in a position like this. You receive all of the downside, but none of the benefit.”
Cronje tells his story
Cronje said that, on the advice of regulatory advisers, he avoided discussing the case publicly during the probe to prevent worsening the legal situation.
Now, he feels more at ease sharing his story, citing what he sees as a change in the SEC’s enforcement approach under its current leadership.
Cronje’s revelation is unsurprising, considering the SEC’s former chairman, Gary Gensler, is a renowned crypto skeptic who waged significant legal challenges against crypto firms. However, the financial regulatory agency’s current chief, Mark Uyeda, has shown more openness to the sector.
Cronje is now back in the crypto world as a cofounder of Sonic Labs. This team created Sonic, an advanced blockchain solution.
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