BlockFi paying $100 million for failed register offers and sales of the crypto product

• According to the Financial Times, as of December 8, 2021, over 500,000 people had invested more than $10 billion in BlockFi.

• BlockFi recently agreed to pay a $100 million settlement to the Securities and Exchange Commission (SEC) after the SEC accused the company of “failing to register the offers and sales of its retail crypto lending product.”

• According to the SEC’s release, the company was determined to be in violation of the Investment Company Act of 1940.

Know more about the million-dollar violation

BlockFi ran into difficulty with regulators in July of last year, when the New Jersey Bureau of Securities asked it not to take payments for its BIA plan from residents of New Jersey.

According to the SEC’s release, the company was determined to be in violation of the Investment Company Act of 1940 by promising to pay interest on deposits but not having registered with the Commission to do so properly.

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For several years, BlockFi has provided interest-bearing accounts for crypto deposits. Variable interest rates on these accounts exceeded 9% per year, which was much more than any other product of its kind.

The SEC paper that sparked the debate was followed by a dissent letter by Commissioner Hester M. Peirce, both of which were published on the SEC website.

BlockFi-SEC Agreement: results in a penalty

The SEC’s decision to charge BlockFi for its “unregistered” crypto lending products that garnered high-yield interest rates was originally reported in November of last year by several media publications.

According to the agreement, BlockFi will pay a $50 million penalty to the SEC and another $50 million to the 32 states where the crypto lending site is facing similar allegations. 

“This is the first lawsuit of its sort using crypto loan services,” said SEC head Gary Gensler.” Today’s settlement underscores that cryptocurrency marketplaces must follow time-tested securities laws,” he continued.

In addition, the corporation would no longer make “unregistered offers and sales of the lending product.” The SEC requested that BlockFi register its lending operation under the Investment Company Act of 1940.

Can SEC’s fine issue be resolved?

The first was BlockFi CEO Zac Prince, who issued a series of tweets and a news release calling it a historic day for BlockFi and its interest-bearing product, the BIA.

The industry was excited with the $100-million fine issued on BlockFi, as well as Commissioner Peirce’s lengthy but passionate comment calling the penalty “disproportionate” for providing investors with a solid return. 

Prince commented on the settlement in the press statement, in addition to discussing the details and how it impacts or does not affect investors.