BlockFi fined $943,000 for failing to register securities in Iowa; pay $100 million in settlement

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Cryptocurrency trading and lending platform BlockFi was fined $943,000 by the Iowa Division of Insurance for failing to register securities in the state and offering and sold securities in Iowa without being registered as a broker or agent, according to a June 14 report. Press release.

The order was issued after the conclusion of a multi-state investigation by the U.S. Securities and Exchange Commission (SEC) and securities regulators in 53 jurisdictions, which were part of North American Securities Administrators Association (NASAA).

According to the press release, BlockFi will also pay settlements of $50 million to the SEC and an additional $50 million to the 53 investigating jurisdictions. The company has also been ordered to cease and desist from making misrepresentations regarding the securities.

Iowa Insurance Commissioner Doug Ommen said in the press release:

“While innovations, such as cryptocurrencies, can ensure the growth and evolution of the financial system, it is important that regulators ensure that this happens within an appropriate framework that protects investors while facilitating the formation capital officer.”

The investigation found that BlockFi was offering and selling unregistered securities and misrepresenting the risk level of its loan portfolio. In various articles on the website, BlockFi claimed that its institutional loans were “generally” over-collateralized, which turned out to be untrue, according to the press release.

According to the survey, only 24% of BlockFi’s institutional crypto loans in 2019, 16% of loans in 2020, and 17% of loans in the first half of 2021 were overcollateralized. Therefore, BlockFi’s assertion of overcollateralized loans “suggested to investors that they got more default protection than BlockFi actually got,” the press release said.

Oman said:

“No matter how knowledgeable or interested investors are in cryptocurrency, investors need accurate information on which to base their decisions.

“Iowans are encountering new innovations in investing with the advent and increased adoption of cryptocurrencies, however, speculative investments such as these should be treated as such – as speculative Iowans need to make sure they only invest what they are willing to lose.

As of December 31, 2021, BlockFi held approximately $14.6 million in assets from Iowa residents, compared to approximately $267,000 at the end of 2019, according to the press release.

BlockFi did not respond to requests for comment at the time of publication.

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