Cryptocurrency trading and lending platform BlockFi was fined $943,000 by the Iowa Insurance Department for failing to register securities with the state and for offering and selling securities in Iowa without registering as a broker-dealer or agent, according to June 14. Press release.
The order was issued following the completion of an investigation by the US Securities and Exchange Commission (SEC) and securities regulators from 53 North American Securities Administrators Association (NASAA) jurisdictions.
According to the press release, BlockFi will also pay $50 million in compensation to the Securities and Exchange Commission and another $50 million to 53 investigative jurisdictions. The company was also ordered to stop and refrain from making false statements about the securities.
Iowa Insurance Commissioner Doug Ommen said in a press release:
“While innovations such as cryptocurrencies can enable the growth and development of the financial system, it is important that regulators ensure this is done within an appropriate framework that protects investors while also promoting responsible capital formation.”
The investigation revealed that BlockFi offered and sold unregistered securities and misrepresented the level of risk in its loan portfolio. Various posts on the BlockFi website claimed that its institutional loans were “usually” over-collateralized, which turned out to be false, according to a press release.
According to the study, only 24% of BlockFi institutional crypto loans in 2019, 16% of loans in 2020, and 17% of loans in the first half of 2021 were over-collateralised. As such, BlockFi’s announcement of the over-collateralized loans “told investors that they provided more default protection than BlockFi actually provided,” according to the press release.
“Whatever the knowledge or interest of investors in cryptocurrencies, investors need accurate information on which to base their decisions.
“Iowans are facing new investment innovations with the advent and wider adoption of cryptocurrencies, but such speculative investments should be treated as such — as speculative. Iowans need to make sure they only invest what they’re willing to lose.”
The press release states that as of December 31, 2021, BlockFi held approximately $14.6 million in assets from Iowans, up from approximately $267,000 at the end of 2019.
BlockFi has not responded to requests for comment at the time of publication.
Credit : cryptoslate.com