BlockFi Ordered to Pay More Than $943,000 in Iowa for Failing to Register Securities
Des Moines, Iowa – Iowa Insurance Commissioner Doug Ommen recently issued a consent order against BlockFi Lending LLC (BlockFi) after BlockFi offered and sold securities in Iowa that were not registered or permitted for sale in Iowa as well as offering and selling securities in Iowa without being registered as a broker-dealer or agent. BlockFi was ordered to pay an administrative fine in the amount of $943,396.22 and cease and desist from making any untrue statement of material facts regarding securities.
“While innovations, like cryptocurrencies, may provide for growth and evolution in the financial system, it is important that regulators ensure this occurs within an appropriate framework that protects investors while still facilitating responsible capital formation,” Iowa Insurance Commissioner Doug Ommen said. “Iowans can always double-check before investing to make sure an investment is properly registered with the Iowa Insurance Division by calling 877-955-1212.”
The consent order is part of the conclusion of a broader multi-state investigation, where the U.S. Securities and Exchange Commissioner (SEC) and state securities regulators from 53 jurisdictions came together as members of the North American Securities Administrators Association (NASAA) to investigate. BlockFi will pay settlements up to $50 million in total to the 53 jurisdictions following the investigation as well as another $50 million to the SEC. The consent order found that in addition to offering and selling unregistered securities, BlockFi made misrepresentations and omissions about the level of risk in its loan portfolio which did not allow investors to have complete and accurate information to evaluate the risk of the investment. Specifically, BlockFi stated in multiple website posts that its institutional loans were "typically" over-collateralized when in fact most loans were not over-collateralized. Twenty-four percent of the institutional digital asset loans BlockFi made in 2019, 16% of the loans made in 2020, and 17% of the loans made in the first half of 2021 were over-collateralized. BlockFi's statements that their loans were "typically" over-collateralized suggested to investors that they had secured more protection from default than BlockFi had actually secured.
“Whatever investors’ knowledge or interest in cryptocurrency, investors need accurate information to base their decisions on,” Ommen said. “Iowans are encountering new innovations in the investment area with the advent and greater adoption of cryptocurrencies, however, speculative investments such as these should be handled just as such – as speculative. Iowans should make sure they are only investing what they may be willing to lose.”
As of December 31, 2019, BlockFi and its affiliates held approximately $267,626 in assets from Iowa residents. As of December 31, 2020, BlockFi and its affiliates held approximately $5,551,884 in assets from Iowa residents. As of December 31, 2021, BlockFi and its affiliates held approximately $14,665,519 in assets from Iowa residents.
Iowans with questions or concerns about investments can contact the Iowa Insurance Division at 877-955-1212 or at iid.iowa.gov.
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