BlockFi to Pay $100M Penalty and Stop Opening New High-Yield Bitcoin Accounts

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Key Takeaways:

  • BlockFi has agreed to pay $100 million to settle ongoing investigations by the Securities and Exchange Commission and several state securities regulators.
  • According to our sources, Madelyn McHugh, a spokesperson for BlockFi, told that the company would “not comment on market rumours.”

BlockFi is a cryptocurrency lending platform. It has agreed to pay $100 million to settle ongoing investigations by the Securities and Exchange Commission and several state securities regulators. According to a Bloomberg report based on anonymous sources, BlockFi will also stop accepting new high-yield accounts from most US residents.

According to our sources, Madelyn McHugh, a spokesperson for BlockFi, told that the company would “not comment on market rumours.” However, she added, “We can confirm that clients’ assets are safeguarded on the BlockFi platform, and BlockFi Interest Account clients will continue to earn crypto interest as they always have.” If so, that means existing account holders might be grandfathered in.

BlockFi’s business model involves paying customers high-interest rates in exchange for locking cryptocurrencies. High-interest rates on cryptocurrencies are locking like Bitcoin, Ethereum, and Tether in savings accounts. The funds are then lent out at even higher interest rates by the company. However, the SEC claimed in November that these BlockFi Interest Accounts, which can yield 5 to 10%, are unregistered securities.

The SEC attention came after a quintet of state securities regulators from Alabama, Kentucky, New Jersey, Texas, and Vermont issued show-cause or cease-and-desist orders. The orders were issued demanding that BlockFi cease offering products to their residents. Other crypto lenders, including BlockFi competitor Celsius, are being investigated by state and federal regulators. In addition, Coinbase cancelled its planned high-yield Lend product in September. They did this after the SEC threatened to sue them. If accurate, the $100 million settlement would be one of the largest-ever cryptocurrency enforcement actions. 

Chaahat Girdhar
Chaahat Girdhar

I'm Chaahat Girdhar, a journalist by profession who's turning her dreams into vision and vision into reality. I'm curious and have an appetite for gaining new knowledge. So I'm looking forward to learning things in the better way possible.

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