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BarnBridge DAO calls halt to ‘all work’ on DeFi protocol amid SEC probe

Some DAO members joked about the situation while others believed there may be an ulterior motive at play.

BarnBridge DAO members have been told to pause “all work” related to the project after a reported probe by the United States Securities and Exchange Commission (SEC).

In a July 6 post to the platform’s Discord channel, Douglas Park, a lawyer for the decentralized autonomous organization revealed the news to members.

“I am letting you know that the Securities and Exchange Commission is investigating BarnBridge DAO and individuals associated with the DAO,” Park said.

In order to “reduce potential further legal liability,” Park suggested “all work” on BarnBridge-related products should stop — including the closure of liquidity pools — and that individuals should not receive compensation for work flowing from the investment efforts of the DAO.

Co-founder Tyler Ward, presumably dubbed “Lord Tyler” on Discord, confirmed Park’s message was true on BarnBridge’s Discord shortly after.

Park and Ward didn’t explain why the SEC launched a probe into BarnBridge DAO. Park however explained that because the investigation is “ongoing” and “non-public,” only limited information can be shared.

Between June 30 and July 3, 100% of BarnBridge (BOND) token holders — voted on a proposal to retain the law firm Park & Dibadj LLP — of which Park is the managing partner — as legal counsel for the DAO “for various legal work.”

213,000 votes were cast and 201,000, or 94.3%, of them came from the wallet “barnbridge.eth.”

100% of the 213,000 BOND tokens were placed in favor of the proposal. Source: Snapshot

The timing and subject of the proposal may suggest the SEC launched an investigation into BarnBridge DAO before June 30.

Some DAO members have raised suspicions over the announcement, however.

One member of the Discord asked for supporting evidence of the SEC’s investigation and implied BarnBridge’s founders may be using it as an excuse to facilitate an “exit strategy” to potentially defraud investors.

Ward refuted the claim stating it would be the “worst thought-out rug attempt in history.”

Other members took the news more lightheartedly with one saying it’s “time to move to Europe” — suggesting DAO members could hide from the SEC.

Another jokingly stated that anyone who interacted with BarnBridge would be “shot” by SEC chair Gary Gensler “on live TV” — alluding to his tough stance on crypto.

Mixed reactions were recieved from BarnBridge DAO members on Discord. Source: Discord

Related: This little-known DeFi crypto token has rallied over 800% in a month

BarnBridge is a cross-platform risk management DeFi protocol that attempts to tackle inflation risk and interest rate volatility.

Since the news emerged, the price of its native token BOND has fallen 1.9% to $3.12, according to CoinGecko. The token is down 98.3% since its all-time high price of $185.7 on Oct. 27, 2020, and currently has a market cap of $29 million.

Early last month, the SEC filed lawsuits against two of the industry’s largest exchanges Binance and Coinbase, alleging they offered unregistered securities.

The reported investigation into BarnBridge, a small to mid-sized DAO, could suggest the securities regulator isn’t just looking to target the crypto space's largest organizations.

Cointelegraph contacted the SEC for comment but did not receive an immediate response.

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FBI searched Kraken co-founder’s home in March: Report

Electronic devices were seized from former Kraken CEO Jesse Powell’s Los Angeles home in connection to a non-crypto-related investigation into alleged hacking and cyberstalking.

The United States Federal Bureau of Investigations (FBI) reportedly searched the home of Kraken co-founder Jesse Powell in March as part of an investigation into claims he hacked and cyber-stalked a nonprofit arts group.

It is claimed that Powell interfered with computer accounts by blocking access to emails and other messages from contributors of Verge Center for the Arts — the non-profit Powell founded, according to a July 6 report from The New York Times, citing three people with knowledge on that matter.

The trio informed The NYT that the FBI and the U.S. Attorney’s Office for the Northern District of California has been investigating Powell since “at least” September.

Electronic devices were reportedly seized from Powell’s home in Brentwood, Los Angeles as part of the search. However, it is understood that prosecutors have not accused Powell of any crimes.

Powell’s lawyer, Brandon Fox said the investigation mostly focused on allegations made by Verge Center for the Arts — the nonprofit Powell founded, and not anything to do with Powell’s involvement in the “cryptocurrency arena.” This was reportedly also confirmed by a Kraken spokesperson.

Fox also said that Powell “did nothing wrong.”

An inside view of Verge Center for the Arts, which was founded by Powell. Source: Verge Center for the Arts

Cointelegraph reached out to Jesse Powell for comment but did not receive an immediate response.

Related: Former FTX exec Ryan Salame’s home searched by FBI: Report

Powell reportedly founded the Sacramento-based arts group in 2007. However, his LinkedIn states that he’s worked as the founder and board member since April 2010.

Kraken remains the second largest United States-based cryptocurrency exchange behind Coinbase, according to CoinMarketCap.

Kraken was hit with enforcement action by the U.S. Securities Exchange Commission in February for failing to register the offer and sale of their staking service program.

The firm reached a settlement with the securities regulator, paying a lofty $30 million fine.

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Could Ben.eth’s PSYOP tokens face legal scrutiny? It depends, say lawyers

Michael Kanovitz, a lawyer threatening to file a class action against Ben.eth, says the PSYOP scheme bear similarities to cases that have seen SEC enforcement.

Ben.eth, the pseudo-anonymous memecoin creator behind at least three controversial token launches in recent weeks, could fall under the crosshair of United States regulators, crypto lawyers suggest.

A previously little-known personality in the crypto community, Ben.eth has seen his Twitter following blow up nearly five-fold in May. The influencer has launched at least three memecoins in recent weeks — Ben Coin (BEN), PSYOP, and LOYAL.

Pre-sales of these memecoins — which require Ether (ETH) to be sent directly to the creator himself — have allowed Ben.eth to gather thousands of ETH. Currently, his wallet holds 10,946 ETH, equivalent to $20.8 million.

The ETH balance of the ben.eth wallet is nearing $21 million worth. Source: Etherscan

While Ben.eth’s supporters have defended the legitimacy of the token sales, others warn that the influencer’s actions could face the wrath of regulators and disgruntled investors alike. 

Michael Kanovitz, a partner at Loevy & Loevy, told Cointelegraph that the Psyop launch “is a classic example of the concerns the SEC [U.S. Securities and Exchange Commission] has identified in actions like those against Kim Kardashian and Paul Pierce.”

Kanovitz recently sent a profanity-laden letter via NFT to Ben.eth threatening a class-action suit against him, alleging that the influencer “used a manipulative launch strategy” in the PSYOP presale.

Kanovitz alleged that Ben promised Psyop’s returns on investment would be “several fold or greater” and claimed he “coordinated with other influencers to spread misinformation” and potentially manipulated the token's price.

Pointing to BEN and LOYAL, Kanovitz said he’s “continuing to gather evidence” on the alleged scheme.

In comments to Cointelegraph, Michael Bacina, a lawyer and partner at Piper Alderman, said that the legal trouble Ben could find himself in depends on if the sales are investigated and what U.S. regulator carries out that investigation.

The Securities and Exchange Commission, for example, might believe the tokens are investment contracts — as it does with most other cryptocurrencies — and could consider them unregistered securities, which could see Ben face possible fines and penalties.

Cointelegraph has contacted Ben.eth on multiple occasions but has not received a response. Cointelegraph contacted the SEC for general comment but did not receive an immediate response.

Related: Memecoins: From memes to multibillion-dollar pumps, scams and rug pulls

Ben.eth’s most recent token launch, LOYAL, is supposedly for an in-development decentralized exchange (DEX) and “memecoin launchpad” named PsyDex that will be a competitor to Uniswap, according to collaborator Ben Armstrong.

Meanwhile, other influencers have attempted to capture some of the recent memecoin magic, asking followers to send ETH for essentially “nothing.”

The wallet address “yougetnothing.eth” currently shows a balance of 411 ETH worth $780,000 and has close to 4,000 transactions over the last 13 hours, according to Etherscan.

Other influencers, such as American socialite Kim Kardashian, have been slapped by the SEC for crypto promotions. In October, the regulator fined Kardashian $1.26 million for her involvement in the promotion of EthereumMax (EMAX). In February, NBA player Paul Pierce made a similar-sized settlement with the regulator.

Additional reporting by Jesse Coghlan.

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Elon Musk requests dismissal of $258B Dogecoin lawsuit: Report

The plaintiff's brought up Musk’s Saturday Night Live appearance in 2021, where he portrayed "a fictitious financial expert" and called Dogecoin “a hustle,” resulting in a steep price decline minutes after.

Elon Musk and his lawyers reportedly requested a United States judge to dismiss the $258 billion lawsuit filed by investors who alleged that he operated a pyramid scheme to promote the cryptocurrency Dogecoin (DOGE).

According to an April 1 Reuters report, Elon Musk's lawyers referred to the lawsuit filed by Dogecoin investors, as a “fanciful work of fiction,” in Manhattan's federal court on March 31.

It was reported that the investors accused Musk of driving up Dogecoin's price "more than 36,000% over two years and then letting it crash."

Musk's lawyers referred to his Dogecoin statements as “innocuous and often silly tweets," in an effort to convince the judge to "throw out" the multi-billion dollar lawsuit.

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Musk's lawyers explained that his Dogecoin-related comments – including “Dogecoin Rulz” and “no highs, no lows, only Doge” – were “too vague” to warrant a fraud claim. The lawyers noted:

“There is nothing unlawful about tweeting words of support for, or funny pictures about, a legitimate cryptocurrency that continues to hold a market cap of nearly $10 billion.”

The investors cited Musk’s Saturday Night Live (SNL) appearance, in May 2021, where he portrayed "a fictitious financial expert," and called Dogecoin “a hustle,” as a reference point in the lawsuit.

Minutes after his SNL appearance, the price of DOGE dumped more than 25%, falling as low as $.50 from $.66 highs at the start of the show.

Musk appeared to make numerous efforts to reignite people's enthusiasm for Dogecoin following his television appearance.

He told his Twitter followers just days after that he is working with "Doge devs to improve system efficiency," and that it could be "potentially promising."

During the market crash in March 2022, Musk told his Twitter followers that he would not sell his crypto holdings including Bitcoin (BTC), Ethereum (ETH), or DOGE.

The lawyer representing the investors, Evan Spencer, reportedly stated in an email that "we are more confident than ever that our case will be successful."

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Voyager victim calls for trustee to seize control of the estate

The 120-page motion came from a creditor who asked for the appointment of a chapter 11 trustee citing alleged fraud and incompetence at Voyager.

A Voyager creditor and finance lawyer wants to see a chapter 11 trustee appointed in crypto brokerage Voyager Digital’s bankruptcy trial, which would see Voyager lose control of its estate.

In a Feb. 1 motion, Voyager creditor Michelle DiVita accused Voyager of having a “history of financial statement inaccuracies and public misrepresentations that were known, or reasonably discoverable, at the beginning of the bankruptcy proceeding."

Due to this pre-bankruptcy conduct, DiVita believes that an examiner or trustee should have been requested, and is now doing so herself.

The filing alleges that Voyager “concealed the true nature of its lending activities by publishing financial reports that materially understated its loan positions by more than $1 billion USD.”

A former director and CIO for Voyager, Shigo Lavine, highlighted some of the key accusations made in the filing in a lengthy Feb. 1 twitter thread.

For example, Voyager allegedly underreported a loan to crypto hedge fund Three Arrows Capital by $609 million and also undervalued Bitcoin (BTC) in its financial reports by 546% to downplay the size of its loans.

According to the filing, crypto exchange Coinbase also caught wind of Voyager’s “financial reporting inconsistencies,” and had reportedly backed out of a potential deal to acquire the assets of Voyager after finding “the financials don’t add up.”

The bankruptcy proceedings already involve a United States Trustee, who is required to bring a motion to appoint a chapter 11 trustee when there are “reasonable grounds to suspect” that the debtor “participated in actual fraud, dishonesty or criminal conduct.”

While the U.S. Trustee appoints a creditors committee and reviews applications for the recompensation of professionals amongst other duties, they may also hire a bankruptcy trustee to manage the debtor’s affairs if the debtors are not allowed to do so themselves.

Cointelegraph has contacted Voyager for a response to the allegations and the motion but did not receive an immediate response.

Related: Voyager tells court Binance acquisition plan is ‘sound business judgment,’ urgently needed

In other news, both Voyager and its creditors have pushed back at an attempt by bankrupt trading firm Alameda Research to claw back $446 million in loan repayments.

After commencing chapter 11 proceedings on Jul. 5, Voyager had demanded the repayment of all its outstanding loans to Alameda, and was repaid in full.

However, Alameda sought to recover the funds in a Jan. 30 court filing, arguing that because they repaid the loans within 90 days of filing for chapter 11 bankruptcy themselves, they could “claw back” these funds for the benefit of Alameda creditors.

Voyager says that its creditors have suffered “substantial harm” due to Alameda making a bid for Voyager’s assets that it could not honor, costing them in excess of $100 million. Voyager argues that this makes Alameda’s claim subordinate to those of its other creditors.

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