BlockFi fined $100 million for violating the 1933 Securities Act, set to launch compliant new product "BlockFi Yield"

On 2/12, the cryptocurrency lending platform BlockFi was reported to pay a $100 million fine to settle charges with the U.S. Securities and Exchange Commission (SEC) and various state regulatory authorities. Following this, the SEC issued an official announcement, BlockFi's CEO explained the incident on Twitter, and there will be changes to their products.

Compliant New Product: BlockFi Yield

BlockFi CEO Zac Prince explained the situation on 2/15 via Twitter, citing the penalty imposed on the BlockFi Interest Account (BIA) interest account provided to U.S. users as the main reason. Other products such as wallets, trading, loans, credit cards, and institutional product BlockFi Prime are not affected.

After the settlement, U.S. users will no longer be able to register or deposit funds into BIA, but assets previously deposited will continue to earn interest. In addition, BlockFi has registered a new product called "BlockFi Personalized Yield" with the SEC under the 1933 Securities Act to continue serving U.S. users.

SEC: First Case Involving Crypto Lending Platforms

According to the announcement, the SEC has charged BlockFi with operating for over 18 months without registration and issuing securities, with misleading statements on the risk levels of its lending activities on the BlockFi website. SEC Chairman Gary Gensler stated:

This is the first case involving a crypto lending platform, and the crypto market must adhere to long-standing regulations such as the 1933 Securities Act and the 1940 Investment Company Act. This also signifies the SEC's willingness to work with platforms to ensure compliance.

The SEC also issued an investor alert emphasizing the risks behind high-yield cryptocurrency products, including:

• Insufficient liquidity in the crypto market.
• Possibility of platform closures and bankruptcies.
• The market for specific assets may disappear entirely and become untradeable.
• Regulatory changes in specific countries.
• Potential fraud, hacking, and malicious software.

It points out that platforms like BlockFi typically compare their 8% profit rates with traditional banks but do not adhere to federal regulatory oversight like banks nor provide FDIC insurance to safeguard user deposits.

BlockFi stated that the new product BlockFi Personalized Yield has been registered with the SEC and can also be used by U.S. users during the registration process.