BlockFi To Pay $100M In Penalties Over Crypto Interest Accounts

Crypto lender BlockFi faces up to $100 million in penalties to settle investigations into its crypto interest accounts.

What Happened: According to a report from Bloomberg on Friday, BlockFi will be required to pay a $50 million fine to the U.S. Securities and Exchange Commission (SEC) and another $50 million to various states such as New Jersey, Texas, Kentucky, Alabama, and Vermont.

BlockFi’s financial penalties are reportedly among the highest levied on any cryptocurrency firm in the U.S.

Sources familiar with the matter said that BlockFi will no longer be allowed to open interest-yielding accounts for most American citizens.

Also Read: SEC Delays Decision On Grayscale's Bitcoin Spot ETF, Requests Public Comments About Proposal

Why It Matters: BlockFi’s crypto interest accounts became the subject of scrutiny last year when regulators alleged that the platform was “illegally offering a product that pays customers high interest rates to lend out their digital tokens.”

The SEC and state regulators also alleged that BlockFi’s crypto interest accounts are equivalent to securities.

BlockFi CEO Zac Prince stated that the platform remained firm in its assertion that the BlockFi Interest Account is not a security.

We remain firm in our belief that the BlockFi Interest Account is not a security.

We are fully operational for all of our existing clients in New Jersey and worldwide, who continue to have access to all products, services, and assets on the BlockFi platform.

— Zac Prince (@BlockFiZac) July 21, 2021

BlockFi isn’t the only crypto company facing negative repercussions of the SEC’s scrutiny. In September 2021, Coinbase Global Inc COIN dropped its crypto lending product entirely after the SEC threatened legal action if the crypto exchange brought it to market.

Price Action: At press time, the leading digital asset Bitcoin BTC/USD was trading at $42,160, down 0.41% in the last 24 hours.