BarnBridge Winds Down Activity Amid SEC Investigation

BarnBridge, a protocol for trading structured derivatives, is the latest web3 team facing an  investigation from the U.S. Securities and Exchange Commission.

On Thursday night, Douglas Park, legal counsel to the BarnBridge DAO, announced that the SEC is currently investigating BarnBridge DAO and individuals associated with DAO.“To reduce further legal liability, existing liquidity pools should be closed, and no more liquidity pools should be started,” Park posted to BarnBridge’s Discord.

“All work on BarnBridge-related products should stop, and individuals should no longer be compensated until further notice.”

Tyler Ward, BarnBridge’s co-founder, confirmed that the information contained in the post was accurate. BarnBridge’s BOND token is down 8% in 24 hours, according to CoinGecko.

Regulation By Enforcement

The news comes as the SEC is upping its campaign against the web3 industry. In early June, the SEC filed lawsuits against top centralized exchanges Coinbase and Binance. BarnBridge differs from the SEC’s recent crypto cases in that it’s a smaller DeFi protocol and not a large centralized exchange.

The SEC issued a record $6.4B in civil monetary penalties from 760 total enforcement actions during the 2022 fiscal year, including crypto and non-crypto.

Congress Backlash

However, the SEC is facing backlash from Republican congressional representatives and web3 advocates for its aggressive campaign of regulation-by-enforcement under current SEC chair, Gary Gensler.

On June 12, Republic Congressman Warren Davidson proposed the SEC Stabilization Act. The bill would replace the role of SEC chairperson with six commissioners tasked with rulemaking and an executive director overseeing day-to-day operations, firing Gensler in the process. “U.S. capital markets must be protected from a tyrannical chairman, including the current one,” Davidson tweeted. “It’s time for real reform and to fire Gary Gensler.”

On May 15, House Majority Whip, Tom Emmer, introduced a bill seeking to amend the 1933 Securities Act to protect non-securities assets sold via a securities contract from being classified as securities, including specific provisions for digital assets.

BarnBridge’s Decline

BarnBridge has taken a beating since its giddy early 2021 highs. The protocol’s TVL is just $1.3M after peaking at $551M 28 months ago, according to DeFi Llama, and the price of BOND is down more than 96% from its all-time high.

Park said he can only share limited information because the SEC’s investigation is ongoing and non-public. Park added that Ward and fellow co-founder, Troy Murray, won’t comment on BarnBridge DAO or the investigation for the time being.