SEC Slaps BlockFi With $100M Fine – Is It Too Much?
BlockFi could be forced to dig deep into its coffers and pay fines of up to $100 million.
According to credible vines, the United States Securities and Exchange Commission is seeking to slap the crypto lending platform $50 million for providing unregistered securities.
Details have now emerged that an additional $50 million will be paid to five states where BlockFi is under investigation.
An ongoing investigation into the company’s activities by the SEC led BlockFi to pay the hefty fees.
SEC Chairman Gary Gensler announced in early January that crypto exchanges would come under increased scrutiny.
SEC smells something fishy
While the SEC probe on Ripple has been ongoing since 2020, the SEC began putting BlockFi under the microscope in November last year.
According to the SEC, BlockFi’s high-yield accounts constitute unregistered securities.
The crypto lending platform released a statement reassuring investors that the SEC and state regulators were still engaged in discussions.
“We have had a good working relationship with federal and state regulators. Market rumors are not something we are interested in discussing,” the update states.
BlockFi Arm And Leg SEC Fee Costs
The penalties are among the toughest imposed on a cryptocurrency firm in the face of a US crackdown on the industry.
Security regulators in New Jersey, Texas, Kentucky, Alabama and Vermont have questioned BlockFi’s interest account offering.
As part of their investigations, many of these states have issued cease and desist orders throughout 2021.
BlockFi’s business model is to pay customers high interest rates in exchange for storing cryptocurrencies like Bitcoin, Tether, and Ethereum in savings accounts.
Total crypto market cap at $1.853 trillion in the daily chart | Source: TradingView.com
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BlockFi representative Madelyn McHugh claimed the New Jersey-based crypto firm would not comment on market speculation in response to the development.
Despite this, McHugh assured his clients that their funds were safe on the platform.
Crypto lenders have been criticized for luring tens of billions of dollars in deposits by promising returns that far exceed those offered by traditional savings accounts.
Celsius Network and Gemini Trust are two other companies whose high yields have made them popular with retail investors, and BlockFi is one of them.
BlockFi has responded to inquiries about the legitimacy of their “too good to be true” rates of return, which can sometimes reach 10%.
According to the company, because it lends money to institutions, it has the ability to maintain current interest rates.
Meanwhile, a lending product was suspended in September after the SEC sent a warning to Coinbase Global Inc., the largest US crypto exchange, that it would file charges if it went ahead.
Related Reading | SEC Won’t Ban Crypto, It Would Be Congress, Says Gary Gensler
Featured image from CryptoPotato, chart from TradingView.com