The U.S. Securities and Exchange Commission (SEC) has charged BarnBridge DAO, a protocol for trading structures derivatives, and its two founders, Tyler Ward and Troy Murray, with offering unregistered securities.

The federal regulatory agency alleges that BarnBridge DAO’s SMART yield bonds are unregistered as securities, violating U.S. federal law.

The DAO’s SMART yield pools represent a second violation, operating as unregistered investment companies, the financial authority said.

According to the SEC’s orders, the respondents compared the SMART Yield bonds to asset-backed securities and marketed them broadly to the public, attracting more than $509M from investors, read the statement.

Tyler Ward and Troy Murray have agreed to pay more than $1.7 million in settlement charges, avoiding jail time. BarnBridge DAO has also agreed to a cease-and-desist order prohibiting them from offering their investment contracts.

Today’s charges follow an SEC investigation that began in early June, which prompted the DAO to wind down activities.

The network total value locked has dwindled since. After peaking at $558 million in early 2021, TVL now sits at $320,790, as per DeFiLlama.