The United States Security and Exchange Commission (SEC) has ordered crypto lending company BlockFi, to pay $100 million for operating high-yield interest accounts that the agency deems to be securities.
In a February 14 charge sheet, the regulatory agency alleged that the New Jersey-based BlockFi failed to register all high-yield interest accounts linked to its unregistered lending service. However, the SEC ordered BlockFi to pay a $50 million fine and another $50 million to settle similar charges from 32 states.
Interestingly, BlockFi has agreed to immediately stop onboarding new customers to the unregistered service to adhere to the Investment Company Act of 1940 within the next 60 days.
BlockFi launched a high-yield interest account service in March 2019, allowing investors to lend their digital assets to the platform to get payments up to 9.5% monthly interest.
Although securities laws drafted in the late 1930s and 1940s have repeatedly received intense criticism over their applicability on digital assets-based products, SEC chairman Gary Gensler has defended their use in a statement, adding:
Buy Crypto Now“Today’s settlement makes clear that crypto markets must comply with time-tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940. It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws.”
Crypto lending products started gaining intense scrutiny from both Federal Reserve and state regulators in September 2021. According to a January report, the regulatory agency is still investigating similar lending services offered by Gemini, Celsius, Network, and Voyager Digital to evaluate whether these offerings contain securities.
