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Crypto Lender Agrees to Pay $100m in Fines
A cryptocurrency lending firm has settled to the tune of $100m after first-of-its kind regulatory action from the US Securities and Exchange Commission (SEC).
The SEC charged BlockFi Lending with failing to register the offers and sales of its retail lending product and with violating the registration provisions of the Investment Company Act of 1940.
The problem centers around the firm’s BlockFi Interest Accounts (BIAs), which enabled members of the public to lend their cyptocurrency assets to BlockFi in return for variable monthly interest payments.
The SEC said this meant BIAs technically fell under the scope of securities law, requiring prior registration from BlockFi or application for an exemption, which it did not do.
The SEC also ruled that BlockFi held more than 40% of its total assets, excluding cash, in investment securities, including loans of crypto assets to institutional borrowers.
The regulator added that BlockFi had made “a false and misleading statement” on its website for over two years, related to the level of risk in its loans and lending.
“Crypto lending platforms offering securities like BlockFi’s BIAs should take immediate notice of today’s resolution and come into compliance with the federal securities laws,” said Gurbir Grewal, director of the SEC’s Division of Enforcement.
“Adherence to our registration and disclosure requirements is critical to providing investors with the information and transparency they need to make well-informed investment decisions in the crypto asset space.”
In settling the charges laid against it, BlockFi has agreed within 60 days to pay a $50 million penalty to the SEC, cease its unregistered offers and sales associated with BIAs, and attempt to align its business with the requirements of the Investment Company Act. It will also pay $50m in fines to 32 states in order to settle similar charges.
The firm’s parent company will register under the Securities Act of 1933 the offer and sale of a new lending product.