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BlockFi has agreed to pay a $100 million fine to the SEC and 32 states to settle allegations related to a retail crypto lending product.
The largest SEC fine ever for a crypto case
According to SEC, the fine includes $50 million for state regulators and $50 million for SEC. It is the largest fine ever imposed by the federal securities regulator in a crypto case. In settling the case, BlockFi did not admit to the regulators’ allegations. The company will stop selling the product in the U.S. and introduce a new product that complies with securities laws.
BlockFi said in its announcement that it would file an SEC registration statement for a new crypto-lending product called BlockFi Yield and transfer investments in its BlockFi Interest Account to the new product unless customers direct the company otherwise. International investors are not affected by the enforcement actions.
We have entered into a landmark resolution with Federal and State regulators that provides clarity on and a pathway forward for crypto interest-bearing securities. pic.twitter.com/raIikoTNE6
— BlockFi (@BlockFi) February 14, 2022
Regulatory pressure in the lending space
The settlement stems from SEC’s investigation of BlockFi last year, which stalled over the lender’s high-yield crypto product. At issue is that BlockFi Interest Account paid an interest rate to retail investors who lent their crypto assets, which BlockFi then lent to institutional investors. The SEC order cites case law that BlockFi Interest Account is a form of investment contract or note.
The charges come at a time when U.S. regulators, concerned about investor protection and systemic risk, are cracking down on the booming crypto industry by forcing companies in the space to comply with existing U.S. securities laws. . The SEC even called on other crypto lending companies to come forward and ensure that their products comply with securities laws.
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