(Bloomberg) — BlockFi Inc., a popular crypto platform, has agreed to pay $100 million to the Securities and Exchange Commission and state regulators after allegations that it illegally offered a product that allowed customers to exchange their digital tokens. Pays high interest rates for lending.
The company sold accounts to US investors without registering them as securities with the SEC, the agency said in a statement on Monday. As part of the agreement, current BlockFi customers can continue to earn interest on their existing investments, but the company must not sell products to new US customers. The company has 60 days to comply with SEC regulations and is also seeking to register a new crypto-lending product that will meet the agency’s regulations.
“Today’s agreement makes clear that crypto markets must comply with time-tested securities laws,” SEC Chairman Gary Gensler said in a statement. “This further reflects the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws.”
Read More: BlockFi To Pay $100 Million To The SEC, Exceeds Crypto Lending
BlockFi, which did not accept or deny the regulator’s findings, will pay $50 million to the SEC and another $50 million to 32 states. This is the largest fine ever imposed by the SEC against a crypto company.
As part of the allegations, the SEC said that the Jersey City, New Jersey-based firm had made a misleading statement on several website posts, saying that institutional loans were “typically” over-collateralized, while most were not.
Republican Commissioner Hester Pearce said in a statement that he voted against the settlement because the $100 million in combined penalties was “exceeding proportion” to the charges. “Rather than forcing transparency around retail cryptocurrency lending products, today’s agreement may prevent them from being offered to retail customers in the United States,” she said.
Meanwhile, BlockFi CEO Zac Prince said that the company will work with the regulator to ensure its regulations are followed. “We want BlockFi Yield to be a new, SEC-registered crypto interest-bearing security that will allow customers to earn interest on their crypto assets,” he said in a statement.
BlockFi will be the first platform to register a cryptocurrency interest-bearing security, a move that could pressure other firms with similar products to follow suit. Companies that offer digital-asset lending have attracted billions of dollars in deposits by promising returns far higher than those available through traditional savings accounts.
According to the SEC, as of March 2021, BlockFi and its affiliates held approximately $14.7 billion in BlockFi interest accounts. That same month the firm raised $350 million in a round from investors including Bain Capital Ventures and Tiger Global, valuing the company at $3 billion.
– With assistance from Zeke Fox and Yuki Yang.