3 U.S. States Say BlockFi’s Interest-Bearing Accounts Violate Securities Laws
- New Jersey, Alabama, and Texas have increased regulatory pressure on BlockFi.
- The states claim BlockFi’s interest Accounts (BIAs) are unregistered securities and violate state laws.
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Cryptocurrency platform BlockFi is facing increased regulatory scrutiny in three U.S. states, all of which claim that the company’s BlockFi Interest Accounts (BIAs) may be unregistered securities offerings. BIA enable users to deposit their cryptocurrencies and earn interest on their funds, with rates varying depending on the type of asset deposited.
New Jersey, where BlockFi is headquartered, issued a summary cease-and-desist order on 20 July banning BlockFi from selling “unregistered securities” through its BIAs and accepting new BIAs from New Jersey residents. The state’s Bureau of Securities initiated the investigation due to rising concerns over the proliferation of DeFi platforms in the state, claiming they present a heightened risk of loss to investors.
Zac Prince, the CEO of BlockFi, said the state gave the company an extension and moved the date when the ban would take effect to 29 July. He noted the company has been engaged in an “ongoing and productive dialogue” with all relevant authorities, but maintained the company’s position that BlockFi Interest Accounts aren’t securities.
On 21 July, the Alabama Securities Commission issued a Show Cause Order to BlockFi, giving the company 28 days to show cause they aren’t selling unregistered securities in the state. The following day, the Texas State Securities Board scheduled a hearing for 13 October to determine whether it would issue a cease-and-desist order against BlockFi. The Board said it had notified BlockFi about its potential violation of the state’s securities laws in April.
- A cyber security incident at bankruptcy service provider Kroll has resulted in the exposure of “non-sensitive” customer data for claimants involved in the FTX and BlockFi cases.
- Both companies confirmed that account passwords, systems, and funds remained safe, but warned customers to be on the lookout for phishing scams.
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- Core Scientific’s bankruptcy filing revealed the company had between $1 billion and $10 billion in assets, and the same amount in liabilities.
- The company is one of the largest Bitcoin miners in the world, and is responsible for around 10% of the computing power on the Bitcoin network through its 243,000 machines.
- The crypto lender is seeking permission from the U.S. bankruptcy court to resume withdrawals for users that have their crypto locked in its Wallet Accounts.
- It also wishes to update its user interface, which at present incorrectly shows that some transactions took place after it paused withdrawals on 10 November.