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Blockfi agrees to pay $100M in penalties and pursue registration

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Re: Blockfi agrees to pay $100M in penalties and pursue registration

#41

Post by capableweb »

vinniejames wrote: post #34
capableweb wrote: post #25

Earlier quoted context omitted.

I'm not 100% sure, as I don't work for the SEC and don't have any special insights into this case. But I'll make a guess and say that they probably downplayed the risks in one way or another on their website, compared to statements made to the SEC. Let's say they say "It's risk-free!" on their website while in a statement to the SEC they say "There is a small risk customer lose their funds if X happens".

Quoted post unavailable.

It's not just about misleading claims, but also that BlockFi broke regulations by doing "unregistered offers and sales of the lending product" and "operated for more than 18 months as an unregistered investment company".

In other words, BlockFi failed to do the bare minimum to run a financial investment service, and are now getting punished for it. That doesn't sound like a overreach to me.

And yeah, in general, laws are usually interpreted subjectively, as laws usually give some wiggle-room to make sure it covers enough ground without having to write 1000 pages about every single edge-case.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#42

Post by shafyy »

Striking how BlockFi's official announcement reads compared to the SEC's statement: https://blockfi.com/regulatory-developments/

Zac Prince, CEO and Founder of BlockFi, said: “From the day we started BlockFi, we have always known that strong engagement with regulators would be critical for the adoption of financial services powered by cryptocurrencies. Today’s milestone is yet another example of our pioneering efforts in securing regulatory clarity for the broader industry and our clients, just as we did for our first product – the crypto-backed loan. We intend for BlockFi Yield to be a new, SEC-registered crypto interest-bearing security, which will allow clients to earn interest on their crypto assets.”

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#43

Post by endorphine »

SilasX wrote: post #35
coconut08 wrote: post #7

Is there something about Gemini's version of the interest bearing account that makes it less problematic than Blockfi's offering? Why is it that Blockfi has taken so much heat and Gemini has seemed to fly completely under the radar? Does this suggest that the issue was the marketing and the implementation that was the issue rather than the product itself?

The SEC is apparently looking at Gemini too, though it didn’t seem to get a lot of discussion (sorry, “have legs”) when the stories came out: https://www.bloomberg.com/news/articles/2022-01-26/crypto-le... Disclosure: have significant holdings in Gemini’s lending program and used to in BlockFi’s.

Would you mind elaborating on why you chose to make the disclosure? It puzzles me because I don't see how it's relevant to the rest of the comment.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#45

Post by celticninja »

shafyy wrote: post #42

Striking how BlockFi's official announcement reads compared to the SEC's statement: https://blockfi.com/regulatory-developments/ Zac Prince, CEO and Founder of BlockFi, said: “From the day we started BlockFi, we have always known that strong engagement with regulators would be critical for the adoption of financial services powered by cryptocurrencies. Today’s milestone is yet another example of our pioneering effort…

Company spins news to make itself look good.

Nothing new here, definitely nothing unique to cryptocurrency companies.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#47

Post by matthewdgreen »

vinniejames wrote: post #6
capableweb wrote: post #3

Interesting to read BlockFi's own statement about the event: https://blockfi.com/regulatory-developments/ No mention of the fine at all, and instead framed as "first SEC registered crypto interest-bearing security" (from BlockFi's page) rather than "[BlockFi] failing to register the offers and sales of its retail crypto lending product" and "the SEC also charged BlockFi with violating the registration provisions of t…

Quoted post unavailable.

>Did they fail to make interest payments as promised? Did they advertise an interest rate the they didn't fulfill?

You could say more or less the same thing about Bernie Madoff's fund, at least right up until the end. I'm not saying that BlockFi is doing anything wrong here, but simply having good results for a while in a bull market doesn't make everything magically ok.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#48

Post by f0e4c2f7 »

capableweb wrote: post #3

Interesting to read BlockFi's own statement about the event: https://blockfi.com/regulatory-developments/ No mention of the fine at all, and instead framed as "first SEC registered crypto interest-bearing security" (from BlockFi's page) rather than "[BlockFi] failing to register the offers and sales of its retail crypto lending product" and "the SEC also charged BlockFi with violating the registration provisions of t…

Crypto to me reads increasingly like classical finance as time goes by. The parallel here is that banks lobby against new regulation, then once the regulation exists as a moat, they lobby to keep the regulation.

I'm sure the 100M fine didn't feel great but unless it bankrupts the company I doubt that BlockFi would want to go backwards now. For the low price of 100M they now have a map of how to legally do business in the space, in a way that is now much scarier to any would be new entrants.

At its most optimistic I think crypto is trying to avoid some of these regulatory rube goldberg value extraction machines. Maybe it will in some spots, but you can see too where it may also just reinvent them.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#49

Post by shafyy »

vinniejames wrote: post #34
capableweb wrote: post #25

Earlier quoted context omitted.

I'm not 100% sure, as I don't work for the SEC and don't have any special insights into this case. But I'll make a guess and say that they probably downplayed the risks in one way or another on their website, compared to statements made to the SEC. Let's say they say "It's risk-free!" on their website while in a statement to the SEC they say "There is a small risk customer lose their funds if X happens".

Quoted post unavailable.

> The SEC simply wants to expand their regulatory power outside of what they are permitted to do and is flexing on a big player for the media attention.

No, they are not. The SEC's goal is to protect consumers and the general public, and like most other regulatory agencies, have been doing a good job at it.

I feel like there is a growing distrust in the government (at least in the US) and this is not a good thing. If you don't like what the SEC is doing, get involved in a democractic way (voting, organizing, etc.) and change it.

Re: Blockfi agrees to pay $100M in penalties and pursue registration

#50

Post by shrikant »

vinniejames wrote: post #34
capableweb wrote: post #25

Earlier quoted context omitted.

I'm not 100% sure, as I don't work for the SEC and don't have any special insights into this case. But I'll make a guess and say that they probably downplayed the risks in one way or another on their website, compared to statements made to the SEC. Let's say they say "It's risk-free!" on their website while in a statement to the SEC they say "There is a small risk customer lose their funds if X happens".

Quoted post unavailable.

What sort of "intellectual DDoS" is this -- reeks of disingenuity.

Page 9 of the PDF of the actual order (linked on the page under "SEC Order") explains how BlockFi made misleading claims:

> From March 2019 through August 2021, BlockFi misrepresented on its website that its institutional loans were “typically” over-collateralized, when in fact, most institutional loans were not. Accordingly, although BlockFi made other disclosures on its website concerning its risk management practices, BIA investors did not have complete and accurate information with which to evaluate the risk that, in the event of defaults by BlockFi’s institutional borrowers, BlockFi would be unable to comply with its obligation to pay BIA investors the stated interest rates or return the loaned crypto assets to investors upon demand. This false and misleading statement was in the offer and sale of BIAs, and as such was in the offer and sale of securities.

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