In the latest regulatory action, Iowa has fined BlockFi over $943k. This was after the crypto firm allegedly sold unregistered securities to the public. In addition, the regulatory agency ordered the exchange to stop making false statements about securities.
The Iowa Insurance Division (IID) Fines BlockFi Over $934k
The IID is a regulator that handles the sales of securities in Iowa. Recently, it has fined a cryptocurrency lending platform, BlockFi, for selling unlicensed securities.
According to the regulator, BlockFi offered and also sold unlicensed securities in Iowa. Additionally, the firm is not registered as an agent or broker-dealer. This violates the securities Act of the state.
Doug Ommen, the commissioner of Iowa Insurance, stated that:
“Innovative technologies such as crypto allow for evolution and growth of the financial space. However, regulators must ensure that it protects the rights and funds of investors. They will also facilitate lawful capital formation.”
The IID’s financial penalty is part of the SEC’s investigation of BlockFi. In February, the SEC ordered the crypto company to pay a fine of $100 million. $50 million was to settle the federal agency. Then, the remaining $50 million was to settle 32 state regulators.
Additionally, the IDD accused BlockFi of omitting its loan portfolio’s risk level. BlockFi allegedly told investors its loans were over-collateralized. Meanwhile, only 17% of the platform’s loans in Q1 2022 were collateralized.
According to the IID,
“BlockFi misinformed investors that its loan were over-collateralized. This made investors believe it had obtained license from the necessary authorities.”
In 2021, cryptocurrency lending platforms were the main target of state and federal regulators. The Attorney General’s office of New York ordered two exchanges to stop lean activities.
Iowa is not the only US state where BlockFi allegedly sold its unregistered securities. Last year, states such as Vermont, New Jersey, Texas, Kentucky, and Alabama also accused BlockFi of selling unregistered securities.
BlockFi To Lay Off 20% Of Its Employees
Zac Prince, the CEO of BlockFi, made an announcement on Monday. According to him, the firm would be dropping 20% of its workers. This will reduce the number to approximately 600.
Also, Prince noted that this is to allow the firm to meet up with the profitability goals. However, it is not certain if BlockFi’s decision is due to the recent fine. Meanwhile, the news is coming during the ongoing crypto market crisis.
Popular cryptocurrencies such as Bitcoin have fallen below the $25k mark. Also, Ethereum has dropped below $1,300. As a result, several investors have lost millions of dollars.