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Cryptocurrency lending platform BlockFi is expected to pay $100 million in fines to the Securities and Exchange Commission (SEC) and other state regulators over allegations it illegally offered a high-interest yield product.
BlockFi will pay $50 million to the SEC and a further $50 million to various state regulators. Penalties could be announced as early as next week, according to a Bloomberg report on Friday which cited people familiar with the matter. Specific state regulators were not named.
BlockFi will also no longer be able to open any new interest-yielding accounts for most US citizens, per the report. Blockworks attempted to contact BlockFi CEO Zac Prince but did not receive a reply by press time.
The penalties come as US authorities continue to spotlight crypto lending activity deemed to be outside the purview of the country’s financial regulations.
BlockFi’s Interest Account allows users to lend out their crypto for up to 9.25% in annual percentage yield. A customer lending out $30,000 worth of USDT could expect a return of around $2,907 over a yearly period. By contrast, the average bank interest rate for interest checking accounts in the US is around 0.03%-0.06%, a return of just $9 and $18 respectively for the same amount.
The settlement extends from the SEC’s investigation into BlockFi last year which came to blows over the lender’s high-yield interest-bearing crypto product.
New Jersey, Alabama, Kentucky, Vermont and Texas also took action last year after raising concerns over whether the lender’s product constituted illegal securities while accusing the platform of providing minimal protections for customers.
“We have been in productive ongoing dialogue with regulators at the federal and state level. We do not comment on market rumors,” said BlockFi spokesperson Madelyn McHugh as cited in the report. “We can confirm that clients’ assets are safeguarded on the BlockFi platform and BlockFi Interest Account clients will continue to earn crypto interest as they always have.”
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