The Securities and Exchange Commission (SEC) has issued a subpoena to Sushi DAO and its “head chef,” Jared Grey, as part of the regulator’s ongoing efforts to scrutinize the decentralized finance (DeFi) industry and cryptocurrencies. The news was announced in a blog post on the Sushi Forum.
Sushi DAO Takes Precautionary Measures in Response to SEC Investigation
The subpoena indicates that the SEC is investigating potential securities law violations by Sushi DAO, including selling tokens that may be considered securities without proper registration.
Following the SEC’s recent subpoena, the protocol’s head chef, Jared Grey, has requested a $3 million USDT legal defense fund from the decentralized autonomous organization.
The fund will be used to cover the costs of defending against potential legal and financial consequences resulting from the SEC’s investigation, according to Grey, who also commented:
We’re cooperating with the SEC. We do not intend to comment publicly on ongoing investigations or other legal matters.
The blog post also stated that a range of revenue streams would support the Sushi DAO legal defense fund to limit the financial burden on the organization while providing sufficient funds to cover legal expenses and protect its financial solvency. The revenue stream will be a combination of the following:
- These will include 50% of Kanpai fees generated by the SushiSwap decentralized exchange platform.
- 35% of grants generated by the protocol’s business development activities.
- 15% of Sushi tokens generated from the selling of tokens on the market using the time-weighted average price (TWAP) method.
According to Grey, This approach is designed to limit the financial burden on the organization and ensure that it can continue to operate effectively in the face of potential legal and financial consequences resulting from the SEC’s investigation.
Grey has also stated that if the Sushi DAO legal defense fund is exhausted before the conclusion of the legal proceedings, the protocol has made $1 million USDT available to cover legal expenses as needed.
This provision ensures that the protocol can continue to support its core contributors and protect its financial solvency if the initial funding sources for the legal defense are exhausted.
The SEC’s subpoena has impacted Sushi’s token, causing the price to drop by over 5.6%, from a peak of $1.250 to its current price of $1.138.
Featured image from Unsplash, chart from TradingView.com