Today the Securities and Exchange Commission (SEC) announced it had charged BlockFi Lending with securities breaches relating to its cryptocurrency lending activities. The startup agreed to pay a penalty of $50 million to the SEC and another $50 million to 32 state regulators. However, BlockFi intends to register with the SEC for a new “BlockFi Yield” offering, a regulated security.
Talking about the new “BlockFi Yield” plans, the founders said, “With today’s resolution, we are leading the creation of a new regulatory landscape for crypto and our clients.”
Since Gary Gensler took office as Chair at the SEC, he has argued that crypto lending services are securities. Last year, when cryptocurrency exchange Coinbase revealed plans for its cryptocurrency lending product, the SEC apparently stated that crypto lending is an unregulated security and Coinbase did not proceed.
In today’s agreement, the SEC censured BlockFi on three counts. Firstly that its retail crypto lending product is an unregulated security. Secondly, it violated the registration provisions of the Investment Company Act of 1940. That’s because it is not registered as an investment company but issued securities. Plus, more than 40% of its assets apart from cash were held in investment securities, including loans to institutional borrowers.
And thirdly, the SEC found that the website contained misleading statements about the level of risk associated with its lending…
