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Iowa Insurance Division Fines BlockFi More Than $943,000



Iowa Insurance Division (IID), a regulator responsible for many securities sales in the state, has fined crypto lending firm BlockFi more than $943,000 after it allegedly offered and sold unregistered securities.


It has been reported that the state regulator said BlockFi had “offered and sold securities in Iowa that were not registered or permitted for sale in Iowa” in addition to not being registered as a broker-dealer or agent, in violation of the state’s Securities Act.


However, the IID ordered BlockFi to pay $943,396.22 as an administrative fine as well as to cease and desist “from making any untrue statement of material facts regarding securities.”


Doug Ommen, the commissioner of Iowa Insurance, said:

“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 report said that the order behind the financial penalty was part of an investigation by the United States Securities and Exchange Commission, or SEC, in which BlockFi was ordered in February to pay $50 million in settlement to the federal agency as well as $50 million to 32 state-level regulators.

Likewise, according to the IID, BlockFi allegedly made “misrepresentations and omissions about the level of risk in its loan portfolio” and claimed its institutional loans were "typically" over-collateralized when the statement was only true for 17% of loans made by the platform in the first half of 2021.


The IID stated:

“BlockFi's statements that their loans were "typically" over-collateralized suggested to investors that they had secured more protection from default than BlockFi had actually secured.”

Federal and state regulators seemed to target many crypto lending platforms in 2021, with the New York Attorney General’s office ordering two firms to “cease any and all such activity” while potentially investigating three others. Financial regulators from a number of US states, including Texas, New Jersey, Alabama, Kentucky, and Vermont, claimed in 2021 that BlockFi had offered securities unlicensed at the state or federal level.


Thus, Zac Prince, the CEO of BlockFi, announced on Monday that the firm would be laying off 20% of its staff, reducing the number of employees to just over 600, citing the need to achieve profitability goals. It’s unclear whether the financial penalties from state regulators played a role in BlockFi’s decision, but the news came amid the crypto market experiencing extreme volatility, with the price of Bitcoin (BTC), Ether (ETH), and many others dropping between 25–40% in the last few days.


Source: Cointelegraph


 

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