Nearly 900 Mississippians invested assets more than $5 million with BlockFi.
On Thursday, Secretary of State Michael Watson announced his office’s Securities Division joined 31 other state regulators and the Securities and Exchange Commission (SEC) in a $100 million settlement with BlockFi Lending LLC (BlockFi), a digital-asset financial services company, over allegations it illegally offered a product that pays customers high interest rates to lend out their digital tokens.
BlockFi’s $943,396.22 payment to Mississippi is part of a larger settlement in which BlockFi agreed to pay $50 million to state securities regulators and $50 million to the SEC.
“Our team recognizes the value new technology brings to financial markets. However, complying with existing laws and regulations is not a choice, but a necessary step to promote competitive capital markets and continued investor protection,” Secretary Watson said.
Regulators found BlockFi issued securities not registered with the Securities Division nor exempt from registration requirements. The securities, “BlockFi Interests Accounts” (BIAs), offered monthly interest to investors who set up accounts in which they deposited digital assets.
Because of this, investors were sold unregistered securities in violation of state law and deprived of critical information and disclosure necessary to understand the potential risks of these lending products.
“This is the first case of its kind with respect to crypto lending platforms,” SEC Chair Gary Gensler said on Monday. “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. I’d like to thank and commend our remarkable SEC staff and state regulators for their efforts and collaboration on this settlement.”
“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 founder and CEO 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.”