Iowa, a state agency has sent a consent order to BlockFi, a major crypto lending platform, for selling unregistered securities and risking its loan portfolio.
BlockFi has stepped out in defense, stating that the settlements would make its products registered since the products are not a security.
The firm is obliged to pay a fine of $943K as per the consent order as part of the U.S. regulatory settlement.
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Regulatory Investigations
Gary Gensler, the chair of the Securities and Exchange Commission (SEC), has been keenly investigating crypto lenders, and BlockFi has been of interest to the agency.
The consent order is part of the multi-state investigation with the SEC and other 53 states making up the North American Securities Administrators Association (NASAA). It has been confirmed that BlockFi will pay $50 million to the 53 countries and $50 million to the SEC as part of a $100 million settlement with the SEC.
Security regulators from the federal and state agencies have also been investigating the firm’s portfolio. Its interest account serves as a saving account with higher interest rates than traditional saving accounts. The firm gets returns from lending the deposits just like banks.
The company has laid off about 20% of its staff due to the hard market conditions. The company is still planning to raise funds at a lower valuation than the former means.
SEC and regulators in New Jersey, Alabama, Texas, Kentucky, and Vermont have also declared to take action against the company.
BlockFi has come out on some websites and posted in justification of the claims that the loans it offers are not over-collateralized. The order also reveals that less than a quarter of the loans were over-collateralized in 2019 and less than 20% in 2020 and 2021.
