The Iowa Insurance Division, or IID, a regulator responsible for many securities sales in the state, has fined crypto lending firm BlockFi more than $943,000 after allegedly offering and selling unregistered securities.
In an announcement Tuesday, the state regulator said BlockFi had “offered and sold securities in Iowa that were not registered or permitted for sale in Iowa,” as well as not being registered as a broker or agent, in violation of the law. of state securities. The IID ordered BlockFi to pay $943,396.22 as an administrative fine, as well as cease and desist “from making any false statement of material fact with respect to the securities.”
“While innovations such as cryptocurrencies can provide growth and evolution in the financial system, it is important for regulators to ensure that this occurs within an appropriate framework that protects investors while facilitating responsible capital formation. said Iowa Insurance Commissioner Doug Ommen.
BlockFi Ordered to Pay More Than $943,000 in Iowa for Failing to Register Securitieshttps://t.co/LJIYMWX6U1
— Iowa Insurance Div (@IowaInsDiv) June 14, 2022
The order behind the financial penalty was part of an investigation by the United States Securities and Exchange Commission, or SEC, in which BlockFi was ordered to pay $50 million in a settlement to the federal agency, as well as $50 million in dollars to 32 state-level regulators. According to the IID, BlockFi allegedly made “misrepresentations and omissions about the risk level of its loan portfolio” and claimed that its institutional loans were “typically” over-collateralized when only 17% of the loans the platform made in the first half of 2021 they were.
“BlockFi’s statements that its loans were ‘typically’ over-collateralized suggested to investors that they had secured more protection against default than BlockFi had actually secured,” the IID said.
Federal and state regulators have appeared to target many cryptocurrency lending platforms in 2021, with the New York Attorney General’s office ordering two firms to “cease all and any such activity” while potentially investigating three others. Financial regulators in many US states claimed in 2021 that BlockFi had offered securities without a state or federal license, including Texas, New Jersey, Alabama, Kentucky, and Vermont.
BlockFi CEO Zac Prince announced on Monday that the firm would lay off 20% of its staff – reducing the number of employees to just over 600 – citing the need to hit profitability targets. It’s unclear if financial sanctions from state regulators played a role in BlockFi’s decision, but the news came amid a cryptocurrency market experiencing extreme volatility, with the price of Bitcoin (BTC), Ether (ETH) and many others falling between 25-40% in the last seven days.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.