SEC v. Rari Capital

On September 18, 2024, the SEC filed a complaint in the U.S. District Court for the Central District of California against Rari Capital, Inc. and its co-founders, Jai Bhavnani, Jack Lipstone, and David Lucid, alleging violations of securities offering registration, antifraud, and broker registration provisions. Rari Capital operated two blockchain-based investment platforms, Earn pools and Fuse pools, which functioned as crypto asset investment funds, collectively holding over $1 billion in assets at their peak. The SEC alleged that Rari Capital conducted unregistered offerings of securities (pool interests and Rari Governance Tokens, RGT) from 2020 to 2022, misled investors about automatic rebalancing of Earn pools (requiring manual input) and profitability (failing to disclose fees, leading to losses for many investors), and acted as unregistered brokers via the Fuse platform. A separate order charged Rari Capital Infrastructure LLC, which took over Fuse operations in March 2022, with similar violations. On September 19, 2024, the court entered final judgments against all defendants, who settled without admitting or denying allegations. Rari Capital was permanently enjoined from securities law violations and securities offerings. Bhavnani, Lipstone, and Lucid faced permanent injunctions, five-year crypto securities and officer-director bars, and monetary remedies totaling $63,567.51 (Bhavnani), $43,199.98 (Lipstone), and $45,208.92 (Lucid), covering disgorgement, prejudgment interest, and civil penalties. Rari Capital Infrastructure agreed to a cease-and-desist order. The case is fully resolved as of September 19, 2024.