BlockFi may be forced to dig deep into its coffers and pay fines of up to $100 million.
According to credible grapevines, the U.S. Securities and Exchange Commission is looking to slap the crypto lending platform $50 million for providing unregistered securities.
Details have now emerged that an additional $50 million will be paid to five states where BlockFi is being investigated.
An ongoing inquiry into the company’s activities by the SEC led BlockFi to pay the hefty fee.
SEC Chairman Gary Gensler announced in early January that crypto exchanges will face increased scrutiny.
SEC Smells Something Fishy
While the SEC probe into Ripple has been continuous since 2020, the SEC began placing BlockFi under the microscope in November of last year.
According to the SEC, BlockFi’s high yielding accounts constitute unregistered securities.
The crypto lending platform issued a statement reassuring investors that the SEC and state regulators were still engaged in discussions.
“We’ve had a good working relationship with federal and state regulators. Market rumors are not something we’re interested in discussing,” the update stated.
SEC Fee Costs BlockFi Arm And Leg
The penalties are among the harshest imposed against a cryptocurrency firm in the face of a U.S. crackdown on the industry.
Security regulators in New Jersey, Texas, Kentucky, Alabama and Vermont have questioned the offering of BlockFi Interest Accounts.
As part of their investigations, many of these states issued cease-and-desist orders throughout 2021.
BlockFi’s business model involves paying customers high interest rates in exchange for storing cryptocurrencies like Bitcoin, Tether and Ethereum in savings accounts.
Total crypto market cap at $1.853 trillion in the daily chart | Source: TradingView.com
BlockFi representative, Madelyn McHugh, asserted that the New Jersey-based crypto company would not comment on market speculations in response to the development.
In spite of this, McHugh assured their customers that their funds were safe on the platform.
Crypto-lenders have come under fire for attracting tens of billions of dollars in deposits by promising returns that far surpass those offered by traditional savings accounts.
Celsius Network and Gemini Trust are two other firms whose high yields have made them popular with retail investors, and BlockFi is one of them.
BlockFi has responded to inquiries about the legitimacy of their “too good to be true” yield rates, which can sometimes reach 10%.
According to the company, because it lends money to institutions, it has the capacity to maintain the current interest rates.
Meanwhile, a lending product was put on hold in September after the SEC sent a warning to Coinbase Global Inc., the largest U.S. crypto exchange, that it would file charges if it moved forward with it.
Featured image from CryptoPotato, chart from TradingView.com