Crypto lending platform BlockFi charged to pay $100 Million in penalties

Crypto lending platform BlockFi charged to pay $100 Million in penalties

BlockFi Lending LLC, also known as BlockFi, has recently been charged by the Securities and Exchange Commission for failing to list the sales and offers of its retail crypto lending product. In the first-of-its-kind action, the SEC accused BlockFi of violating the registration provisions as per the Investment Company Act of 1940.

For settling the SEC charges, BlockFi agreed for paying a penalty of $50 million, ceasing its unregistered sales and offering of the lending product, BlockFi Interest Accounts (BIAs), and will put an effort to bring its business within the boundaries of the Investment Company Act.         

The parent company of BlockFi’s has also stated that it plans to register under the Securities Act of 1933 the sale and offer of a new lending product. In parallel actions announced today, BlockFi agreed to pay an extra $50 million in fines to around 32 states for settling similar charges.

SEC Chair, Gary Gensler said that this is the first-of-its-kind case with respect to platforms that offer crypto lending services. The settlement makes it clear that the market of crypto must conform with time-tested securities law, like the Securities Act of 1933 and the Investment Company Act of 1940.

It further demonstrates the willingness of the Commission to work with crypto platforms for determining how they can comply with those laws.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said that crypto lending platforms providing securities like BlockFi’s BIAs should take instant notice of today’s resolution and comply with federal securities laws.

Cohesion to the disclosure and registration requirement is important for providing investors with the data and transparency they want for making well-informed investment decisions in the crypto-asset ecosystem.

Source Credit - https://www.sec.gov/news/press-release/2022-26