SEC accused of pressuring DeFi execs to exit crypto industry

The U.S. Securities and Exchange Commission (SEC), under the leadership of former chair Gary Gensler, is facing allegations of pressuring founders of decentralised finance (DeFi) platforms to abandon the crypto industry as part of settlement agreements.

According to Joey Krug, a partner at the venture capital firm Founders Fund, the SEC imposed restrictions preventing these founders from future involvement in the crypto space.

Speaking at the ETHDenver conference on February 27, 2025, Krug stated that the SEC required founders to sign agreements that effectively barred them from ever working in crypto again.

These agreements allegedly included non-disparagement clauses, preventing the founders from publicly discussing the terms.

Krug's claims support the "Operation Chokepoint 2.0" rumor, which suggests that the Biden administration has been attempting to stifle the crypto industry through regulatory enforcement and by pressuring banks to limit services to crypto firms.

Krug further claimed that the SEC told DeFi founders that if they didn't agree to the settlement, they would "end up in jail."

He added that none of the cases have been referred to the Department of Justice and that "none of these founders actually broke the law."

Krug initially doubted the existence of such settlements but stated he was later shown agreements by some founders, who he did not name, confirming the inclusion of clauses preventing them from working in crypto and prohibiting them from discussing the matter.

The SEC has not yet responded to requests for comment on these allegations.

The SEC has used "gag rules" since 1972, which forbids defendants from criticising the agency’s claims.

Commissioner Hester Peirce has said that this clause "undermines regulatory integrity."

Krug suggested that the only way these DeFi founders could publicly address the settlements is if Congress requested their testimony.

The SEC has recently taken enforcement actions against DeFi platforms, including Rari Capital and BarnBridge DAO.

In September 2024, the SEC announced settled charges against Rari Capital and its co-founders for misleading investors and engaging in unregistered broker activity.

In January 2024, BarnBridge DAO and its founders settled charges with the SEC for operating as an unregistered investment company.

The SEC's actions demonstrate its focus on DeFi protocols.