BlockFi agreed to pay $100 million to settle ongoing investigations
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
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.
CBW - External Analyst