BlockFi, a cryptocurrency firm, is set to pay USD100 million to the U.S. Securities and Exchange Commission as well as various states in order to settle charges linked to its popular crypto lending product. The SEC determined that BlockFi had violated three areas of federal securities laws like selling unregistered securities, operating as an unregistered investment company, and making “material false and misleading statements” within its website that loans were over collateralized.
“This is the first case of its kind with respect to crypto lending platforms,” SEC Chair Gary Gensler said in a statement.
“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,” he added.
Though bitcoin and other digital assets are not regulated, authorities are becoming more aware of the lack of oversight for crypto-related services, which often resemble traditional financial products that are regulated. The SEC revealed Monday it had charged BlockFi for failing to register its retail crypto lending product, BlockFi Interest Accounts as well as for violating the registration provisions of the Investment Company Act of 1940.
“From the day we started BlockFi, we have always known that strong engagement with regulators would be critical for the adoption of financial services powered by cryptocurrencies,” BlockFi CEO and founder Zac Prince said in a statement.
“Today’s milestone is yet another example of our pioneering efforts in securing regulatory clarity for the broader industry and our clients, just as we did for our first product – the crypto-backed loan,” he added.