Acting AG Platkin: Cryptocurrency Lending Platform BlockFi Agrees to $100 Million Settlement with State and Federal Securities Regulators


NEWARK – Acting Attorney General Matthew J. Platkin and the Bureau of Securities announced today that a Jersey City-based financial services firm, BlockFi Lending, LLC, has reached a $100 million settlement with law enforcement. state and federal securities regulations regarding unregistered company offerings and sales. securities in the form of interest-bearing digital asset custody accounts called BlockFi Interest Accounts.

Of the total settlement amount, $50 million will be paid to the United States Securities and Exchange Commission, and up to $50 million will be divided equally among participating members of the North American Securities Administrators Association. New Jersey’s share will be $943,396.22.

The Securities Bureau issued a summary cease and desist order against BlockFi in July 2021, making it one of the first securities regulators in the country to take action against the company. At the time, the Bureau alleged that BlockFi raised at least $14.7 billion globally through the sale of unregistered securities and used those funds to fund its cryptocurrency lending operations and transactions. for own account. As of December 31, 2021, BlockFi had 407,030 investors in the BlockFi Interest Account in the United States.

“Cryptocurrency-related investments can offer something new to investors, but they still have to follow the rules,” Acting Attorney General Platkin said. “Today’s action demonstrates that companies providing digital asset financial products and services must comply with state and federal laws, and demonstrates New Jersey’s commitment to protecting investors in these new markets.”

“The Bureau continues to warn investors to look beyond the promise of increased returns and carefully consider the risks,” said acting Bureau chief Amy Kopleton. “Interest-bearing cryptocurrency accounts lack the regulatory oversight necessary to protect New Jersey investors, and the Bureau will continue to enforce laws relating to these products.”

Today’s settlement comes amid growing concerns about the proliferation of “decentralized” and digital asset-based financial products and services targeting retail investors.

Many of these products and services are similar to traditional financial services offered by banks and brokerage houses, but without the regulatory safeguards provided by registered companies and products. For example, registered companies must honestly disclose all known material facts and explain the risks associated with their investments, while the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Securities Investor Protection Corporation insure depositors and investors against certain types of losses.

Financial services firms operating in innovative fintech markets may not comply with important laws that protect retail customers, and investors may not have access to the information needed to perform due diligence and make informed decisions. cause.

BlockFi entered into the settlement with the Bureau without admitting or denying the findings of fact and conclusions of law, which include that BlockFi offered and sold unregistered securities, did not register an agent as required to sell those securities, and misrepresented the collateral for certain loans to its institutional clients on its website.

Effective immediately, BlockFi will stop offering its BlockFi Interest Accounts to the public. BlockFi’s parent company, BlockFi Inc., said it intends to file with state and federal regulators to offer and sell a new product called BlockFi Yield. As part of the settlement terms, BlockFi will stop allowing new investments in BlockFi Interest Accounts until its securities are properly registered.

BlockFi may continue to deploy digital assets to existing BlockFi Interest Account investors and may continue to pay interest. Between February 14, 2022 and the date BlockFi Inc. securities are registered and qualified or cleared for sale with the states and the United States Securities and Exchange Commission, current investors may retain their existing investments with BlockFi and will continue to earn interest under their original agreement with the company. This measure is designed to protect the interests of existing investors while allowing BlockFi time to come into compliance with state and federal laws.

Today’s settlement is the result of a joint effort between state securities regulators and the United States Securities and Exchange Commission. The Bureau would like to thank the Commission for its collaboration and assistance.

The Bureau’s investigation was led by Investigator Delfin Rodriguez of the Bureau of Securities, Consumer Division. The Bureau is represented by Deputy Attorney General Evan A. Showell, Deputy Section Chief of the Securities Fraud Prosecution Section within the Law Division’s Affirmative Civil Enforcement Practice Group, as well as by Section Chief Victoria A. Manning and Assistant Attorney General Brian F. McDonough.

The Bureau is responsible for protecting investors from investment fraud and regulating the securities industry in New Jersey. It is essential that investors “check before you invest”. Investors may obtain information, including registration status and disciplinary history, of any financial professional doing business into or from New Jersey by contacting the New Jersey Bureau toll-free at 1-866-I- Invest (1-866-446-8378) or from outside New Jersey at (973) 504-3600, or by visiting the Bureau’s website at www.NJSecurities.gov. Investors may also contact the Bureau for assistance or to raise concerns or complaints regarding New Jersey-based professionals or financial investments.

Previous Crypto lending firm BlockFi to pay $100 million fine in securities case
Next Fintech company Sharegain raises $64 million for a securities lending platform