Andre Cronje says 'stressful' SEC probe is why he left DeFi

Sonic Labs co-founder Andre Cronje said that he stepped away from DeFi in 2022 due to the stress caused by Securities and Exchange Commission’s investigation of DeFi platform Yearn Finance.

“In 2021 I received my first SEC letter … It was a simple request for more information on [Yearn Finance],” Cronje wrote in his blog post published Tuesday. “Then came letter two; at this point it became clear I needed legal assistance as the tone was changing.”

Cronje claimed that he had ensured that his projects — Yearn Finance and Keep3r — stayed outside of potential regulatory scrutiny since their inception, opting not to raise funds or sell tokens. He also claimed that he made sure that he did not benefit from the protocol.

The letters from U.S. regulators persisted with different angles of a potential violation that Cronje, a South African citizen that did not work in the U.S., may have committed.

“As I spent weeks and months of my life trying [to] collect information and answer their questions (often requesting data I simply did not have, but was required to provide), the drain on my time, energy, and resources became apparent,” wrote Cronje, adding that attending the SEC’s legal inquiries had caused him to completely halt development.

The Yearn Finance creator said he was left with two choices to either continue trying to build products with constant “attacks” from regulators, or step away from DeFi.

“After 2 years of needing to deal with this every month, and endless sleepless nights and stress. I chose the latter,” Cronje said.

Meanwhile, Cronje had reportedly left Fantom, another project that he helped develop, in March 2022 along with Yearn Finance. 

However, Cronje told The Block the following year that he had never really left Fantom, and that his distance from Fantom was only made public to divert “bad press” he was receiving at the time.

The DeFi developer had been in controversy in the past for allegedly putting unaudited code live while he was still building, which had caused some to lose their funds. Cronje had disputed this claim, saying that the code he shared was audited, just not publicly disclosed.

New direction

Cronje said in his latest blog post that the new direction of the SEC and the wider U.S. regulation on crypto and blockchain has allowed him to write about his experience. Previously, investigators “strongly advised” him not to talk about the investigation as it could worsen the situation, according to Cronje.

“It was a challenging, and incredibly stressful time,” Cronje wrote. “And I do not wish any of my fellow builders should have gone through something like that.”

Former SEC chair Gary Gensler, who spearheaded “regulation by enforcement” on the digital asset sector, departed the agency last week following the reelection of Donald Trump as U.S. President. 

Trump, during his first week in office, signed an executive order to establish a working group tasked with providing regulatory clarity for the local cryptocurrency sector, signifying a broader shift in the U.S. government’s stance on crypto.