The Securities and Exchange Commission (SEC) and several US states have imposed a monetary fine of $100m on BlockFi Lending (BlockFi) for illegally selling retail crypto lending product.
The SEC has charged BlockFi for failing to register its crypto lending product and violating the registration provisions.
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BlockFi has agreed to pay $50m in penalty settle the SEC’s charges, stop offering its lending product and BlockFi Interest Accounts (BIAs).
Additionally, the firm will bring its lending business under the purview of the Investment Company Act of 1940 in 60 days.
Furthermore, BlockFi agreed to pay the remaining $50m as a penalty to 32 states to settle similar charges.
Notably, this is the first case of its kind concerning crypto lending platforms.
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By GlobalDataAs per the SEC’s order, BlockFi offered and sold BIAs to customers from 4 March 2019 until this week.
The offering allowed customers to lend their crypto assets to BlockFi for a monthly interest payment.
SEC noted that BIAs are securities as per the law and should have been registered.
The regulator also stated that BlockFi operated as an unregistered investment company because it held over 40% of the total assets in investment securities such as loans of crypto assets.
BlockFi has also been booked for making false and misleading claims concerning risks associated with its loan portfolio and lending activity.
BlockFi has agreed to the SEC’s orders without admitting or denying its findings.
SEC enforcement division director Gurbir Grewal 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.
“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.”
