The regulator announced its decision to impose the fine in a press release today, making it not only the first-ever dApp fine for crypto lending but also the largest fine in ages.
The decentralized lending protocol BlockFi, meanwhile, has developed its own plan to deal with this.
SEC fined $100 million
The Securities and Exchange Commission today charged BlockFi LLC with violating the Investment Company Act of 1940, and the decentralized protocol itself announced that they will also register the LLC under the Securities Act of 1933.
The condition the SEC has placed under these charges is that BlockFi pay $50 million in penalties to the SEC and an additional $50 million in fines to the 32 states in the country where it faces similar charges is faced.
SEC Chairman Gary Gensler stated in the press release:
“Today’s settlement makes it clear that crypto markets must comply with well-established 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 enforce compliance with these laws.”
According to the regulator, BlockFi had sold BlockFi Interest Accounts (BIAs) to allow investors to lend crypto assets like Bitcoin, Ethereum, etc. to the exchange.
At the same time, the DeFi protocol offered a monthly interest payment granted at 9.25% APY.
However, since the lending platform ran as an unregistered investment company for more than 18 months, it ended up under the SEC’s gavel.
However, according to the SEC, the company agreed to a cease and desist order that included ceasing sales of BIAs in the United States.
BlockFi responds peacefully
In a letter from their founders, BlockFi stated that they intend to continue operations with some exceptions for US-based customers. All other non-US customers will remain unaffected by these changes.
The founders also said:
“We were the first crypto company to receive a state license to provide crypto-backed lending to US consumers in 2018, and this is the next big example of how we prioritize working with regulators.
With today’s decision, we are spearheading the creation of a new regulatory landscape for crypto and our customers. As we previously disclosed, we intend to file or file confidentially with the SEC a registration statement for BlockFi Yield, a new interest-bearing crypto security.”
This particular case will surely serve as a milestone for crypto companies as the SEC could rain harder next time
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