According to Bloomberg News, BlockFi Inc., which is a popular crypto platform, has agreed to shell out $100 million to state regulators and Securities and Exchange Commission. It was been accused of illegally offering a product to customers that offer high rates of interest against their digital tokens.
Without registering the accounts with the Securities and Exchange Commission (SEC), the company sold these accounts to investors in the United States, as stated by the agency on Monday. The agreement states that the prevailing customers of BlockFi will be able to earn the interest from their present investments, however, the company will not be able to sell the company product to any new American customer. The company has been granted 60 days to seek compliance with the Securities and Exchange Commission’s regulations. Aside from this, BlockFi is also planning to introduce a crypto lending product that will comply with the rules of the agency.
Bloomberg News also reports that BlockFi, neither admitted nor denied allegations related to findings of the regulator and has agreed to pay $50 million to the 32 states. This is the largest penalty ever imposed by the SEC against any company that is engaged in crypto lending.
The SEC, as part of the allegation, stated that New Jersey-based Company had posted on its multiple websites, misleading statement that institutional loans were “typically” over-collateralized, whereas they were not.
Meanwhile, the chief executive officer of BlockFi, Zac Prince, said that the company intends to work with the regulators as per their rules.
According to Bloomberg News, BlockFi is the first platform that would be registering a crypto interest-bearing security. It is a move that might exert pressure on the other crypto lending firms that sell the same kind of product.
Companies that have been extending digital asset lending have appealed to several investors, thereby attracting tens of billions of dollars as deposits promising yields that are far more than what investors would get from investing in traditional savings accounts.
As of March 2021, BlockFi along with its affiliates had about $14.7 billion in BlockFi Interest Accounts, as per the Securities and Exchange Commission. The same month, BlockFi raised $350 million from the Bain Capital Ventures and Tiger Global, in a fundraising round that earned the company as much as $3 billion.
