Crypto Lender to Pay $100 Million in Fines to SEC

Crypto Lender to Pay $100 Million in Fines to SEC

Cryptocurrency lenders are coming under increasing scrutiny as they promise returns well in excess of traditional savings accounts and attract tens of billions of dollars in deposits

BlockFi Set to Pay $100 Million to U.S SEC

According to a report on February 10, BlockFi Inc. is set to pay $100 million to deal with allegations by the U.S. Securities and Exchange Commission and state regulators who illegally offered a product that paid customers high-interest rates for lending digital tokens.

The penalties, which could be announced as early as next week, are among the harshest cryptocurrency companies have to face given the US crackdown on the industry. The SEC and state investigators have been investigating whether the accounts offered by BlockFi are similar to securities that should be registered with the regulator.

As part of a deal with regulators, BlockFi will no longer be able to open new interest-bearing accounts for most Americans, the report stated.

BlockFi spokesperson Madelyn McHugh stated that they have been in productive ongoing dialogue with regulators at the federal and state level. They do not comment on market rumours. They can confirm that clients’ assets are safeguarded on the BlockFi platform and BlockFi Interest Account clients will continue to earn crypto interest as they always have.

The SEC spokesman declined to comment on the matter. SEC Chairman Gary Gensler has sounded the alarm against fast-growing cryptocurrency companies, some of which offer financial services without complying with benchmark investor protection rules that banks, brokers and other long-established companies have long been required to adhere to.

SEC Investigating Other Crypto Lending Platform 

BlockFi, based in Jersey City, New Jersey, will pay a $50 million fine to the SEC and $50 million to states, the report stated. It’s one of several companies, including Celsius Network and Gemini Trust Co., that are popular with retail investors because they pay yields that sometimes exceed 10%.

Over the past year, securities regulators in several states have taken enforcement action against BlockFi and Celsius over the accounts, saying the companies are selling unregistered securities with undisclosed risks. The SEC is also investigating Celsius, Gemini and Voyager Digital Ltd over similar issues, Bloomberg reported in January.

At the time, a Gemini spokeswoman stated that the company was cooperating with an “industry-wide investigation” of products that deliver crypto. Celsius said it is working with regulators to “fully comply with the law,” and a Voyager spokeswoman said ongoing communication with regulators is routine. The SEC has not charged either company with wrongdoing.

The U.S Securities and Exchange Commission has separately warned Coinbase Global Inc., the largest U.S. cryptocurrency exchange, that it will file a lawsuit if it proceeds with the lending product, prompting the company to suspend the project in September.

BlockFi executives said they are able to pay clients such high returns because institutional investors would pay them higher fees for borrowing deposits. Unlike bank accounts, crypto interest accounts are not federally insured.

Earlier this year, BlockFi stated that its Bermuda-based subsidiary would serve foreign customers. It has also launched an interest-free crypto wallet and new interest products for accounts with at least $3 million in cryptocurrency.

Disclaimer: The information in this article should not be considered financial advice, and FXCryptoNews articles are intended only to provide educational and general information. Please consult with a financial advisor before making any investment decisions.

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