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Iowa receives $943,000 from crypto firm BlockFi in unregistered securities settlement

cigaretteman

HR King
May 29, 2001
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Iowa will receive about $943,000 as part of a settlement with the cryptocurrency financial institution BlockFi.

Iowa Insurance Division Commissioner Doug Ommen, whose agency regulates securities in the state, said in a news release this week that the company failed to properly register a financial product known as BlockFi Interest Accounts. Investors deposited cryptocurrencies like Bitcoin and Ethereum into the accounts, with the company paying a percentage back every month.

BlockFi advertised monthly interest rates of up to 9.25%, depending on the volume and type of cryptocurrency an investor deposited. According to the U.S. Securities and Exchange Commission, BlockFi needed to register the product as a security, a step the New Jersey-based company failed to take.

The Iowa Insurance Division pursued legal action against BlockFi as part of a group that included SEC regulators and 31 other state agencies. BlockFi agreed in February to pay a total of $100 million, stop offering BlockFi Interest Accounts in the United States and stop accepting additional deposits from U.S. customers to accounts that already were open.

BlockFi signed a consent order with the Iowa Insurance Division on June 8, agreeing to pay a $943,000 fine in five installments through February 2024.

“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,” Ommen said in a statement.

When BlockFi reached a settlement with the SEC in February, company CEO Zac Prince announced a new product, BlockFi Yield, which would be a registered security.

"We have always known that strong engagement with regulators would be critical for the adoption of financial services powered by cryptocurrencies," Prince said in a statement at the time.

BlockFi's consent order with the Iowa Insurance Division came just before the company announced Monday that it is laying off 20% of its 850 employees, joining other crypto firms that are shedding staff amid a market downturn. Bitcoin has dropped in value by about 28% over the last week. Ethereum has dropped by about 37%.

Prince said in a Twitter thread that the company needed to lay off staff because of a "dramatic shift in macroeconomic conditions," according to CNBC.

BlockFi rapidly grew during the pandemic. According to the consent order, Iowans had steered about $268,000 worth of assets into the BlockFi Interest Accounts as of the end of 2019. By the end of 2021, that figure was up to $14.7 million.

 
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