The U.S. Securities and Exchange Commission (SEC) has charged what it described as a decentralized finance (DeFi) lender, Blockchain Credit Partners (d/b/a DeFi Money Market), and two of its top executives for raising $30 million through allegedly fraudulent offerings.

The case is the agency’s first involving securities using DeFi technology, according to the SEC.

Florida residents Gregory Keough and Derek Acree, along with Cayman Islands-based Blockchain Credit Partners have been accused of selling unregistered securities through their company DeFi Money Market (DMM) – mTokens that yielded 6.25% interest and governance tokens that offered voting rights and other perks in DMM’s decentralized autonomous organization (DAO) – from February 2020 to February 2021.

Though DMM was purportedly decentralized, Keough and Acree’s 50/50 leadership split calls the claim into question. Additionally, the SEC’s order indicates that governance token holders had “no role in running DMM’s core business.”

According to a tweet from DMM’s DAO on Feb. 9th, the company received a subpoena from the SEC in December 2020. Blockchain Credit Partners shut down operations in February and set up a token redemption program that allowed all mToken holders to redeem their tokens for principal and interest owed.

The SEC alleges that Keough, Acree and Blockchain Credit Partners misled investors to believe that investor assets would be used to purchase income-generating assets such as car loans to generate returns for token purchases, and, when they realized that token volatility made this impossible, used personal funds and funds from a separate company to make principal and interest payments for the mTokens.

The respondents agreed to a cease-and-desist order including disgorgement of $12.8 million and penalties of $125,000 for both Keough and Acree. In addition, Keough and Acree will be unable to participate in any offering of a digital asset security for five years.

UPDATE (August 6, 16:03 UTC): Updated with new information throughout.