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BlockFi faces SEC’s probe over several high-yield crypto accounts

BlockFi

TL;DR Breakdown

  • BlockFi is under scrutiny by SEC to establish if they trade in Securities.
  • SEC is keen on establishing its mandate over cryptocurrencies.

BlockFi is facing a probe from the US Security and Exchange Commission (SEC). The crypto lending firm faces scrutiny over its abundant interest-holding accounts.

BlockFi has become famous due to its products. It establishes numerous accounts for users who earn up to 9.5%. Banks offer a paltry 0.06% yearly. Besides, a cryptocurrency savings account has no insurance cover from the state. However, there is insurance cover for banks deposits by the relevant authorities.

SEC has only one primary concern, to establish if BlockFi accounts share similarities to securities. If that is the case, BlockFi would have breached the law by not registering. Therefore, it has to register its products with them. So far, the regulator is not accusing the crypto lender of any mistake.

BlockFi has faced accusations from several states

BlockFi is not facing this scrutiny for the first time. Several states have restricted them. Authorities believe that the crypto lending firm is capable of breaching security laws. They worry about the firm’s high-return accounts.

Three states, including Texas, Alabama, and New Jersey, warned to shut the firm in July. According to those states, the BlockFi platform did not disclose its interest account. As a result, it might be giving unregistered bonds.

BlockFi is a popular platform. The private farm has a value of more than $4 billion. Besides, it entails 500,000 small accounts. BlockFi gives a wide range of products to its users. This has seen the platform attracting huge investors. Bain Capital and Tiger Global enterprises have been backing BlockFi since 2017.

Through the probing, SEC aims to stamp its authority in this field. In recent days the SEC has summoned many crypto traders to share data on their business. Besides, the agency has delivered several warrants to crypto firms to compel them to give information.

SEC, under Gary Gensler, has been sealing the loops on the digital asset space. In September, it cracked down on Coinbase global. It hinted to sue the organization over a lending program. Nonetheless, coinbase left the drive. It desired to give the 4% interest on the crypto holdings by issuing tokens as loans.

SEC continues its clampdown on crypto firms

The regulator is not taking chances with crypto companies. They have initiated several subpoenas to squeeze information. Besides, they have placed several crypto agencies under investigation.

For example, Nano-X is facing scrutiny for violating security laws. The company was served a warrant by SEC to give clarity on the development of Nanox.ARC prototypes. Yet, Nano-X said they had already furnished the agency with the necessary information. They also provided relevant documents.

Around September, SEC began to investigate Uniswap Labs. The agency claimed it was looking into how investors use Uniswap. Besides, they had an interest in how Nano-X does marketing.

Edith Muthoni

Edith Muthoni

Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, cryptocurrencies, blockchain, and cryptocurrency investments.

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