Blockfi Settlement And Its Effects On XRP/Ripple SEC Lawsuit• February 15, 2022 8:44 am • Comments
BlockFi Lending agreed to pay $100 million in fines on Monday as part of a landmark lawsuit in which the Securities and Exchange Commission (SEC) decided that a form of crypto lending product should be registered as a security.
To settle charges, BlockFi will pay $100 million in penalties and has agreed to significant undertakings:
— U.S. Securities and Exchange Commission (@SECGov) February 14, 2022
BlockFi, based in New Jersey, has agreed to pay the SEC $50 million to settle claims that it deceived investors and failed to register its crypto lending products as securities. It agreed to pay an additional $50 million in fines to satisfy identical claims with 32 different states. Although the business would not acknowledge or reject the SEC’s allegations, BlockFi agreed to stop violating federal securities law and will no longer sell its crypto loan products to U.S.-based investors.
According to The Crypto Times:
“This is the first case of its kind with respect to crypto lending platforms. Today’s settlement makes clear that crypto markets must comply with time-tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940,” SEC Chair Gary Gensler noted.
BlockFi also agreed to make an effort within 60 days to bring its operations into compliance with the Investment Company Act of 1940.
1/11 HUGE day for @BlockFi and our interest-bearing product, the BIA. We’ve reached a resolution with both the SEC and state regulators that identifies a clear path forward for folks to earn interest on their crypto. My POV below.
— Zac Prince (@BlockFiZac) February 14, 2022
According to the SEC order, BlockFi has marketed a crypto lending product dubbed BlockFi Interest Accounts (BIAs) from March 2019 to the present and has given investors variable monthly interest payments in return for lending their crypto assets to BlockFi. The crypto assets are then lent to institutional borrowers by the business.
According to the SEC, as of December 8, 2021, BlockFi and its affiliates owned roughly $10.4 billion in BIA assets on behalf of 572,160 investors, 391,105 of whom were based in the United States. In March 2021, the company’s total BIA assets owned reached around $14.7 billion.
The SEC determined that BlockFi’s crypto loan products constitute investment contracts, and the business was required to register the product or request an exemption. According to the SEC, BlockFi did neither. According to the SEC, BlockFi functioned as an unregistered investment business for more than 18 months “because it issued securities and also held more than 40 percent of its total assets, excluding cash, in investment securities, including loans of crypto assets to institutional borrowers,” according to the SEC.
When it issued a Wells Notice to cryptocurrency firm Coinbase over its lending product, Lend, in September 2021, the SEC suggested that it views crypto lending products to be securities. After the SEC threatened to litigate, Coinbase decided to terminate Lend.
What does this mean for the Ripple vs SEC case?
Another case with far-reaching consequences for the sector is the SEC’s action against Ripple Labs and its cryptocurrency, XRP, which is still being litigated in the United States District Court for the Southern District of New York. In that case, the court is likely to rule on whether XRP, which was the third-largest cryptocurrency by market cap when the SEC filed its complaint in December 2020, is a security subject to the agency’s regulatory oversight.
The Securities and Exchange Commission, or SEC, sued Ripple in December 2020, alleging that the XRP cryptocurrency is a security rather than a currency. Ripple, as a payment facilitator, may be subject to securities regulations in the same way that other publicly traded corporations are.
Crypto Lender BlockFi To Pay $100 Million In Settlement With SEC#Ripple did the right thing by fighting back and not giving in like these pussies. SEC definitely took advantage since they never even fined Robinhood this badly 😂https://t.co/NPrhjtvszz
— XRPcryptowolf (@XRPcryptowolf) February 12, 2022
However, Ripple refused to yield, claiming that the XRP coin, like all other cryptocurrencies, is a digital asset. Alternatively, many sources predict that on February 17, a few critical papers will be released, exposing a hole in the SEC’s case against Ripple. Come back to Pro Coin News for updates.
According to Protocol:
“Once released, these documents will show that in 2012 Ripple received a legal analysis that XRP was not an investment contract,” Ripple General Counsel Stuart Alderoty said in a statement. “The fact that it took the SEC eight years to suggest they disagreed with that analysis — while XRP traded in a massive global market — is baffling.”
Following this announcement, the XRP token’s market value increased by about 40% between February 6 and February 8. However, it is still down 75% from all-time highs, having reached US$3.2 during the 2017 bull run. Now the question is, as attorney John Deaton asks is, where will the money go? Is this just a shakedown, or is the SEC actually invested in protecting investors?
When I filed a Writ of Mandamus 🆚 the @SECGov, one of the prayers for relief I asked for was if there’s a fine, settlement or judgement levied against @Ripple, the 💰 would go to #XRPHolders, not the SEC or black hole 🕳 known as the Treasury. What about the $100m from @BlockFi? https://t.co/PMh7WSYjul
— John E Deaton (@JohnEDeaton1) February 15, 2022
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