BlockFi Agrees to Pay $100 Million and Will Cease Unregistered Offerings in the USA

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Key Takeaways:

  • According to the reports issued by SEC, the BlockFi has been operating as an unregistered company for two years. 
  • The company has issued a “cease-and-desist” order and will stop movements of BIA in the U.S. 

A few days earlier, the crypto lending platform BlockFi agreed to pay a $100 million penalty to the Securities and Exchange Commission as orders were issued that it should cease offering products to the residents. However, today, the SEC has charged that the lending platform doesn’t have its retail crypto product transactions registered.

BlockFi has also been found violating the registration provisions of the Investment Company Act of 1940. The platform has agreed to pay $50 million and another $50 million fines to 32 states to settle the charges. In addition, it will also cease all unregistered offers and sales, BIAs. It will also try to bring its ventures within the boundaries of the Investment Company Act within the next two months. 

Gary Gensler, SEC chairman, says that this incident is the first of its kind and, “Today’s settlement makes clear that crypto markets must comply with time-tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940. It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws. I’d like to thank and commend our remarkable SEC staff and state regulators for their efforts and collaboration on this settlement.”

The SEC’s order against BlockFi has found a couple of other things. First, from March 4, 2019, the company has lent unregistered BIAs to the public. In addition, BlockFi has also operated for over 18 months as an unregistered investment company and has been holding on to over 40 per cent of its total assets. 

The Director of the SEC’s Division of Enforcement, Gurbir S. Grewal, has said, “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.” He further added, “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.”

According to SEC’s orders, BlockFi has also been making “false and misleading statements” regarding the risk involved in its “loan portfolio” and other activities related to lending. But the platform is yet to respond to these accusations. 

Shreya Bhattacharya
Shreya Bhattacharya

A journalist & writer exploring new topics every day!


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