by SEC might find BlockFi for the same reason it fined Block.one – offering unregistered SECurities. Crypto lending platform, BlockFi, is expected to pay a $100m fine to SEC after the financial watchdog accused it of paying interest to users who lend out their tokens.
Why The Fine?
The SEC claims that it is illegal for BlockFi to offer such services since it has yet to have the appropriate operating license. While the $100M amount hasn’t been confirmed yet, many crypto analysts expect that the fine would be up to that amount as SEC would want to teach other crypto platforms a huge lesson.
If SEC fines BlockFi for $100M, it will be the largest amount the regulator will fine any crypto firm. Thus, it is no wonder that BlockFi has stopped this offering, at least for its American clients. BlockFi’s high-yield lend product is its primary business offering. It offers up to 10% for users to lend their BTC, ETH, and USDT. Users that lock up their assets also earn greater yield returns.
BlockFi’s Battles With Regulators Continue
As previously reported in various media, BlockFi has had several run-in battles with state financial regulators from New Jersey, Alabama, Texas, and Vermont. The crypto platform has dealt with show-cause and cease-and-desist orders from these state regulators. BlockFi’s latest issue with the federal financial regulator is its high-yield lend offering, which according to the SEC, is being done illegally.
The SEC defines an investment contract as “any amount locked by a customer in an investment product.” thus, giving the financial watchdog jurisdictional powers over such investment contracts. The SEC’s primary concern in these instances is whether the investor’s money is safe and adequate insurance covers if there are losses.
Responding to the SEC’s potential $100m fine, BlockFi’s official response was that it is yet to receive any fine notice from the regulator. The statement also reassured customers that their investments were still safe and would earn them interest. However, they won’t allow any new US users to participate in the offerings.
Not The First Time
Before the SEC issue, some BlockFi customers expressed displeasure with the crypto platform for introducing withdrawal fees on assets. BlockFi announced that it would charge withdrawal fees on seven digital assets (LINK, ETH, BTC, BAT, UNI, LTC, and PAXG) to cater for the rising eth transaction fees.
The users claim that BlockFi could model their transaction fees like other platforms such as Nexo, which offers three withdrawals without transaction fees monthly. Then, charges a flat fee from the fourth transaction.
BlockFi is not the first crypto platform to be fined by the SEC. Two years ago, the SEC fined Block.one $25m for selling unregistered crypto ICOs though it had generated $1B within 12 months. One of SEC’s heads for its enforcement department, Stephanie Avakian, stated that “any company must comply with securities laws when selling securities to American residents regardless of whether they are in the crypto industry or another industry.”
