DeFi project Sushi and its main leader have been subpoenaed by the U.S. Securities and Exchange Commission (SEC), according to a forum post on March 21.
Sushi subpoenaed by regulators
That forum post, published by Sushi “head chef” Jared Grey, indicates that both he and the project itself were recently served an SEC subpoena.
That post suggests establishing a $3 million legal fund to cover legal costs, funded with Tether’s USDT stablecoin and introduced through a DAO proposal.
Results from an early poll attached to Grey’s original forum post suggest that much of the community is in favor of such a legal fund, with 80% of 21 voters stating that they favor establishing the fund. However, that vote is not a decision from Sushi’s DAO.
The forum post gives few other details on the nature of the subpoena. The post says that Sushi will not comment further but that it is cooperating with the SEC.
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%.
Can the SEC regulate DeFi?
In theory, any decentralized finance project should be resistant to regulation due to a lack of central authority that can be targeted by authorities.
As such, the Sushi community questioned how Sushi itself was subpoenaed. Third-party sites suggest that the project is headquartered in New York or Japan, but it is not clear that any offices exist. Supposedly, members of the project’s DAO could be subpoenaed, but at least one member of the DAO has denied receiving the subpoena.
Sushi is not the first decentralized crypto project to attract the attention of the SEC. In 2021, the SEC took action against the fraudulent DeFi Money Market. And in 2018, the SEC took action against the early decentralized exchange Etherdelta and its founder.
It is possible that the SEC is looking into other decentralized projects as well. Unverified rumors emerged around March 3 that several DeFi platforms had received a Wells notice from the U.S. SEC over an unspecified period of time.
However, a Wells notice would indicate that the SEC intends to take enforcement action — whereas Sushi’s subpoena only implies an investigation.