Cryptocurrency lender to pay historic $100 million settlement to SEC

A The cryptocurrency management firm has agreed to pay a $100 million settlement to the Securities and Exchange Commission.

The SEC accused BlockFi, a cryptocurrency lending and management platform, of failing to register offers and sales of its lending product, forcing it to pay a $100 million settlement, the most important for any cryptocurrency company.

“This is the first case of its kind with respect to crypto lending platforms,” ​​SEC Chairman Gary Gensler said in a statement. Press release. “Today’s settlement makes it clear that crypto markets must comply with proven securities laws.”

“It further demonstrates the commission’s willingness to work with crypto platforms to determine how they can comply with these laws,” Gensler added.

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BlockFi allegedly misled its investors about the level of risk they were taking and failed to provide enough information for investors to make sufficiently informed decisions about their investments, the SEC said.

There were also problems with the way the business operated. The way BlockFi managed its assets exposed it to the risk of not being able to pay interest to investors or return any loaded cryptocurrency in the event of negative asset performance, the SEC said.

The company has also not registered its products.

As a result of the violations, the SEC ordered BlockFi to cease its offering and sale of BlockFi Interest Accounts and to bring its operations within the bounds of federal investment laws, specifically the Investment Companies Act 1940. The company agreed to comply and said it would pay the SEC $50 million as part of its settlement. BlockFi also noted that it would pay an additional $50 million to the states in which it registered to pay the relevant fees.

The company also intends to register under the Securities Act of 1933, allowing it to sell BlockFi Yield, a new interest-bearing security, according to its founders.

BlockFi noted the “historic resolution” on its social media and said the decision would provide “clarity and a way forward to interest-bearing crypto securities.”

BlockFi was one of the first cryptocurrency companies to to receive a state-level license for cryptocurrency-backed lending in 2018. BlockFi had approximately 400,000 customers in the United States and more than $10 billion in assets as of December, according to the SECOND.

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The settlement is probably the first in a long series. Gensler expressed interest in cracking down on everything from cryptocurrency to meme stocks in an interview with Bloomberg. The SEC Chairman has already confronted with cryptocurrency firm Coinbase during his testimony before the Senate Banking Committee in September 2021.

Janet E. Fishburn