Cryptocurrency lending platform Blockfi is struggling. Now, the Iowa Insurance Division Fines is asking it to pay nearly $1 million in fines.
On June 14, Iowa Insurance Division Fines (IID) ordered BlockFi to pay an administrative fine of more than $943,000 for failing to register as a securities trading platform.
According to a statement made by Iowa Insurance Commissioner Doug Ommen, BlockFi will be fined $943,396.22 for offering and selling securities in Iowa without the necessary registration and regulatory clearance. Furthermore, they directed that the platform be shut down immediately.
This fine follows an earlier settlement in which Blockfi paid more than $100 million in fines after failing to comply with regulations regarding its crypto lending product. The company paid the fine and restructured its operations soon after.
According to Ommen, regulators must protect citizens from any investment that does not have the proper framework to ensure a “responsible” investment. That is why he urges Iowans to endorse the legitimacy of any type of investment platform with an IID before engaging in any financial decisions.
“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.”
The order follows a multi-state investigation involving the SEC and various state securities regulators from 53 jurisdictions. Regulators determined that BlockFi must pay payments of up to $50 million per jurisdiction, in addition to $50 million to the SEC.
As reported by CoinCu, on June 14, BlockFi announced the layoff of at least 20% of its more than 850 employees due to the “dramatic shift in macroeconomic conditions worldwide.”
The Iowa Insurance Division Fines also alleges that Blockfi lied to its customers. The lending platform claims that its institutional loans are “usually” over-collateralized, which according to investigations by regulators is not.
According to the Iowa Insurance Commissioner, this situation has led Iowans to invest their money in a platform that offers speculations without notifying its customers.
At the beginning of June, BlockFi’s valuation fell from over $5 billion in early 2021 to just $1 billion. This reflects the problems the company is facing with closely coordinated scrutiny from regulators.
Therefore, although the company has yet to issue an official statement about the new payment order driven by IID, the significant number could seriously affect its stability.
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