The U.S. Securities and Exchange Commission (SEC) has charged cryptocurrency lending platform Blockfi in a first-of-its-kind action. The crypto lender has agreed to pay $100 million to settle the charges and pursue necessary registrations.
SEC Charges Crypto Lending Platform Blockfi
The U.S. Securities and Exchange Commission (SEC) announced Monday that crypto lending platform Blockfi has agreed to pay $100 million in penalties.
The SEC explained that “In this first-of-its-kind action,” it “charged Blockfi Lending LLC with failing to register the offers and sales of its retail crypto lending product, Blockfi Interest Accounts (BIAs).”
SEC Chairman Gary Gensler commented:
This is the first case of its kind with respect to crypto lending platforms.
To settle the SEC’s charges, Blockfi agreed to pay a $50 million penalty and cease its unregistered offers and sales of the lending product. The company also agreed to pay an additional $50 million in fines to 32 states to settle similar charges.
Blockfi offered and sold BIAs to the public from March 4, 2019, until today, the SEC detailed. Investors lent their crypto assets to the company in exchange for monthly interest payments.
According to the SEC, BIAs are securities and must be registered with the Commission. Furthermore, the securities regulator said that Blockfi operated for more than 18 months as an unregistered investment company.
As part of the settlement with the SEC, Blockfi agreed to pursue the registration of its cryptocurrency lending product within 60 days. Its parent company also intends to register under the Securities Act of 1933 the offer and sale of a new lending product.
“Today’s settlement makes clear that crypto markets must comply with time-tested securities laws,” SEC Chair Gensler opined, elaborating:
It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws.
In September last year, the Nasdaq-listed cryptocurrency exchange Coinbase got into trouble with the SEC over its plan to launch a lending product. However, after the securities watchdog threatened to sue the company if it proceeded with the launch, Coinbase shelved its plan.
What do you think about Blockfi having to pay regulators $100 million in fines for offering an unregistered lending product? Let us know in the comments section below.