BlockFi, the famous platform for the management of loans of digital assets, has closed a few days ago an agreement with the SEC, the regulator of the American stock exchange, for a dispute that arose regarding the sale of a crypto lending instrument. The company will pay a large fine.
SEC vs BlockFi: fine for crypto loans
In addition to paying a $100 million penalty, BlockFi will remove the product that is the subject of the legal dispute with the SEC from the market.
“This is the first case of its kind with respect to crypto lending platforms”,
said SEC Chairman Gary Gensler in a statement announcing the settlement. Of the $100 million fine, $50 million will go to address the fines received in 32 different states and the other $50 million will go directly to the SEC to pay the fine for the alleged wrongdoing.
According to the SEC’s allegations, through its crypto lending product called BlockFi Interest Accounts (BIA), the company guaranteed an average annual interest rate of 9.25%, much higher than the interest rates offered by similar products. According to the SEC, however, these transactions took place without proper record-keeping, as required by law. In addition, BlockFi operated for more than 18 months as an unregistered investment company.
“Today’s settlement makes clear that crypto markets must comply with time-tested securities laws”,
Gensler added in his statement.
The SEC director has always been highly critical of lending products linked to digital assets, as evidenced by open investigations into similar products offered by companies such as Celsius, Gemini and Voyager.
BlockFi tests a new product
BlockFi is also said to be working on a new product, which will meet the requirements of the SEC and should be ready in April.
“From the day we started BlockFi, we have always known that strong engagement with regulators would be critical for the adoption of financial services powered by cryptocurrencies”,
Zac Prince, CEO and founder of BlockFi, commented on the news.
“Today’s milestone is yet another example of our pioneering efforts in securing regulatory clarity for the broader industry and our clients, just as we did for our first product — the crypto-backed loan. We intend for BlockFi Yield to be a new, SEC-registered crypto interest-bearing security, which will allow clients to earn interest on their crypto assets”.
Launched in August 2017, BlockFi, based in Jersey City, New Jersey, currently operates a trading and lending platform for different cryptocurrencies. Revenue generated for the company at the end of the year is expected to be around $50 million.