The popular Japanese dish, sushi, and its lead chef have been issued a subpoena by the US Securities and Exchange Commission (SEC). The SEC is investigating potential insider trading and other securities violations. The sushi industry has seen a surge in interest in recent years, and this regulatory issue could have major implications for the industry. Stay tuned for updates on this developing story.
Sushi, one of the leading DeFi projects, and its main leader, Jared Grey, have reportedly been subpoenaed by the U.S. Securities and Exchange Commission (SEC). Grey posted on a forum on March 21, stating that both he and the project itself were recently served an SEC subpoena. The forum post suggests the establishment of a $3 million legal fund to cover legal costs, funded with Tether’s USDT stablecoin and introduced through a DAO proposal. The Sushi community questioned how Sushi itself was subpoenaed since Decentralized Finance projects are supposed to be resistant to regulation due to a lack of central authority that can be targeted by authorities. The value of Sushi’s native cryptocurrency token (SUSHI) fell from $1.22 to $1.15 shortly after the news, representing a loss of approximately 6.5%.
Although Sushi is not the first decentralized crypto project to attract the attention of the SEC, the incident begs the question of whether regulators can regulate DeFi. In theory, any decentralized finance project should be resistant to regulation, making it unclear how Sushi was subpoenaed. According to third-party sites, Sushi is headquartered in New York or Japan, but it is not clear that any offices exist. Members of the project’s DAO could be subpoenaed, but at least one member of the DAO has denied receiving the subpoena.
The SEC has previously taken action against fraudulent DeFi projects like DeFi Money Market in 2021 and Etherdelta and its founder in 2018. Unverified rumors emerged in March 2022 that several DeFi platforms had received a Wells notice from the SEC over an unspecified period of time. However, a Wells notice indicates that the SEC intends to take enforcement action, whereas Sushi’s subpoena only implies an investigation.
Given the unprecedented nature of DeFi, regulators are still trying to find their feet in the space. As the popularity of DeFi grows, more regulatory scrutiny is expected. Sushi’s subpoena is a reminder that the DeFi space, which originally promised to be a trustless, decentralized financial system, may still be subject to some form of regulation.