BlockFi agreed to pay $100 million to settle ongoing investigations


Crypto lending
platform BlockFi was going through investigations from the U.S. Securities and
Exchange Commission and multiple state securities regulators for illegally
offering a product that pays customers high-interest rates to lend out their
digital tokens. To settle down the allegations the lending platform agreed to pay
$100 million.
Bitcoin,
Ethereum, and Tether are cryptocurrencies that are locked up in BlockFi's
savings accounts at high-interest rates which BlockFi's business model is
offering to their customers. Then at even higher rates, the company loans those
funds out. Last year BlockFi received enforcement action over the accounts from
the securities regulators of several states claiming that the company was selling
unregistered securities with undisclosed risks. Five state securities
regulators which are Alabama, Kentucky, New Jersey, Texas, and Vermont, demanded
BlockFi should stop selling its products to their residents making SEC game for
scrutiny. In November, the SEC alleged that BlockFi Interest Accounts, which
can yield between 5 and 10%, are unregistered securities. Investigators from
the SEC and state governments have been looking into whether BlockFi's accounts
should be treated as securities that should be registered.
As part of its
agreement with regulators, BlockFi will have to discontinue opening new
high-yield accounts for most American residents. BlockFi, which is based in
Jersey City, New Jersey, will pay a $50 million fine to the SEC and another $50
million to various states as per the report. BlockFi spokesperson Madelyn McHugh “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.”
Other crypto
lenders going through scrutiny from state and federal regulators:
BlockFi
competitor Celsius Network is also facing scrutiny. In September after
Coinbase received threatened to sue from SEC, gave up its planned high-yield
Lend product. As per a report based in January, the SEC is also scrutinizing
Celsius, Gemini, and Voyager Digital Ltd. over similar issues.
In 2019,
According to SEC records, Block. one was fined $24 million for its role in
staging the EOS initial coin offering ICO, which raised $4.2 billion. In 2020 Telegram which is a messaging app, paid
an $18.5 million fine and for its TON token launch refunded investors $1.2
billion.

Indrani bose
CBW - External Analyst
INDIA