- Daily Zen
This settlement by BlockFi is the largest penalty ever recorded when it comes to crypto firms.
On February 14, the officials from the Securities and Exchange Commission (SEC) charged the crypto lending platform BlockFi for failing to register sales and offers of BlockFi’s crypto lending products. The SEC also charged the company for violation of the registration provisions. These provisions are part of the Investment Company Act of 1940. As a result, the company will have to pay $100 million in charges.
This settlement is the largest penalty that was ever recorded when it comes to crypto firms. Part of the payment, $50 million will be paid to the SEC directly, while the other half will go in the form of fines to 32 U.S. states. The payments will be used for the settlement of the charges.
Gary Gensler, SEC Chair, said that this is the first case of this kind when it comes to crypto lending platforms. He also mentioned this settlement is proof that each sale and offer must comply with the regulations. These regulations are strictly connected to the Investment Company Act of 1940 and the Securities Act of 1933.
Gensler said that the SEC is working with the crypto companies to determine the laws and regulations when it comes to the offering of crypto products. This settlement of the BlockFi is proof that the SEC is making its best to comply with the regulations and that is why much effort is invested to make things clear.
The Director of the SEC’s Division of Enforcement, Gurbir S. Grewal said that BlocFi and other crypto companies should make a prompt reaction and comply with the regulatory laws. This kind of settlement is a reminder to the other companies to always stay on the safe side of the law. That is why most decentralized finance companies need to take care of their actions.
Gurbir S. Grewal mentioned that disclosure requirements and adherence to the registration within SEC are crucial for providing the investors with the relevant information. These pieces of information are important for transparency and well-informed decisions the investors need to make. All of these decisions affect the overall crypto asset space and its prosperity in the long run.
As we can see from the SEC’s order, the BlockFi company offered and sold BlockFi Interest Accounts (BIAs) to the customers, and this was happening from March 4, 2019, until today. At the same time, the company was promising the customers variable monthly interest payments. These payments are offered as part of the exchange for crypto assets. Investors were in the deal with the BlockFi company, but they did not know the background of the company.
The SEC order finds that BIAs are securities under the law that is applicable in these financial transactions. However, the BlockFi company did not register the offers and sales of BIAs, which was the reason for the SEC’s reaction.
In addition, the SEC officials found out that BlockFi operated for more than 18 months as a company that was not registered under the official law. This investment company also used investment securities to hold more than 40% of the total assets, excluding cash, in these kinds of securities. As part of these securities, there were also loans of crypto assets that were used by borrowers from the company.
SEC stated that BlockFi made false information about the risk level of the lending activity and its loan portfolio. This information was on their website for more than 2 years.
BlockFi agreed to stop selling or offering BIAs in the United States, and the company also agreed to pay the penalties for the unlawful acts. This means that each crypto company will have to comply with the regulations if they want to stay in the market game under legal conditions in the future.