BlockFi may have to cough up $100 million to pay fines. Sources close to the matter say the SEC is set to impose a $50 million fine on the crypto lending platform for offering unregistered securities. Another $50 million will be paid to five states in which BlockFi is being investigated according to the sources.
BlockFi is closing in on resolution of a regulatory clampdown
Bloomberg reports that BlockFi is closing in on reaching an agreement with regulators to settle allegations that its high-yield earning crypto lending offerings are illegal. Citing sources that did not want to be named, the report noted the penalties could be announced as soon as next week. Additionally, as part of the settlement, BlockFi will stop opening interest-yielding accounts for Americans.
However, BlockFi has not confirmed the claim. An update from the firm assured that there was still ongoing dialogue between BlockFi and both the SEC and state regulators.
We have been in productive ongoing dialogue with regulators at the federal and state level. We do not comment on market rumors, the update said.
The New Jersey-based crypto company added that investors could rest assured that their funds were safe and would continue earning interest.
Statement from BlockFi: pic.twitter.com/gcqbg8zqAv
— BlockFi (@BlockFi) February 12, 2022
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The case has been building since July last year when the state of New Jersey issued a summary cease and desist order stating that BlockFi Interest Accounts (BIAs) are unregistered securities under New Jersey law, and sought to stop BlockFi from opening new BIA accounts worldwide.
This was quickly followed by a similar order from the state of Kentucky, as well as orders demanding information from regulators in Texas, Alabama, and Vermont. The SEC stepped in in November.
BlockFi has responded to questions about the credibility of the mouth-watering yield rates they offer to users, which sometimes reach 10%. The firm explains that it can sustain the rates as it lends the funds out to institutional borrowers.
The SEC has been ramping up its scrutiny of the crypto industry
The SEC is also investigating other crypto lending platforms and exchanges. These include Gemini, Celcius, and Voyager Digital Ltd. While there has largely been cooperation on the part of the firm, the SEC is setting its sights on going after even more crypto platforms.
Gary Gensler, the chair of the regulatory watchdog, has revealed that the organization has crypto platforms on its radar in 2022.
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