Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

sec.gov

Post reply on HN
Print view View original

71–80 of 240 posts

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

#71

Post by chollida1 »

abritrum wrote: post #53

I (along with other) have been filing whistleblower reports on blatant price manipulation on an OTC stock for the entirety of last year (about 30 reports of naked short selling, wash trading). Not one peep from the SEC. It's been eye-opening to see the amount of fraud in the financial markets that goes unchecked. Sometimes I question my sanity that I persist in this stock and whether what I see is illegal. Good to se…

I"ll bite on this. I work in the financial markets and have alot of experience in market structure.

What evidence do you have of wash trading? How would you tell if something is a wash trade? How would you determine if someone is naked shorting? What evidence would you provide for something like this?

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

#72

Post by jonathan-adly »

1. This is a PR win for the SEC. It can now go to congress and say, see, we are working with Crypto companies! (while they really aren't, not in good faith anyway).

2. This is a win for Blockfi. Like other mentions, they gave their business a legal veneer for the sum for $100m. If you are of the opinion that all Cryptos and related companies are scams. Guess what? The SEC disagrees.

3. The same product (even better actually) is done via DeFi. That's where the real battle will be with major implications on the Ethereum ecosystem (or whatever Dapp blockchain you prefer).

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

#73

Post by skybrian »

latchkey wrote: post #31
ivalm wrote: post #12

Earlier quoted context omitted.

Did they offer an unregulated security where there is a chance to lose principle to unsophisticated retail investor which is well known to be illegal? The answer to that is yes.

Their site has always been very clear on the risks involved. "Digital currency is not legal tender, is not backed by the government, and crypto accounts held with BlockFi are not subject to FDIC or SIPC protections. Digital currency values are not static and fluctuate due to market changes." What I think has never been clear is how they were able to manage the risk of their lending practices, in order to provide the…

I'm not sure how disclosure makes it not an unregistered security?

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

#74

Post by Animats »

Basically, the Investment Act of 1934 says:

1. You have to file a prospectus (an S-1) before collecting money.

2. You have to disclose a lot of stuff, like who's really behind this, where the money goes, what the risks are, what's happened so far, and what the business plan is.

3. Lying in an S-1 is a crime.

Crypto schemes tend to violate 1), because 2) would show that their scheme is a scam, and if they tried to cover that up, 3) would put them in jail.

There's grumbling about "paperwork", but that's just an excuse. It's the part about having to disclose all that stuff under penalty of perjury that scammers hate.

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

#75

Post by ProjectArcturis »

jonathan-adly wrote: post #72

1. This is a PR win for the SEC. It can now go to congress and say, see, we are working with Crypto companies! (while they really aren't, not in good faith anyway). 2. This is a win for Blockfi. Like other mentions, they gave their business a legal veneer for the sum for $100m. If you are of the opinion that all Cryptos and related companies are scams. Guess what? The SEC disagrees. 3. The same product (even better a…

Definitely not a win for BlockFi. Definitely not an endorsement of crypto by the SEC. As part of the settlement, BlockFi had to agree to stop doing all that illegal stuff.

"To settle the SEC’s charges, BlockFi agreed to pay a $50 million penalty, cease its unregistered offers and sales of the lending product, BlockFi Interest Accounts (BIAs), and attempt to bring its business within the provisions of the Investment Company Act within 60 days."

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

#76

Post by matkoniecz »

latchkey wrote: post #31
ivalm wrote: post #12

Earlier quoted context omitted.

Did they offer an unregulated security where there is a chance to lose principle to unsophisticated retail investor which is well known to be illegal? The answer to that is yes.

Their site has always been very clear on the risks involved. "Digital currency is not legal tender, is not backed by the government, and crypto accounts held with BlockFi are not subject to FDIC or SIPC protections. Digital currency values are not static and fluctuate due to market changes." What I think has never been clear is how they were able to manage the risk of their lending practices, in order to provide the…

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.

(copy of https://news.ycombinator.com/item?id=30335113 )

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

#77

Post by tcgv »

PragmaticPulp wrote: post #69

Where is the $100 million going to come from? Do they have that much money to spare? Or are their customers about to take a haircut? On that topic, where does BlockFi's profit come from? They're offering 9% (previously 12%) interest on deposits. Are they really re-loaning that money to other people at the 20-30% interest rate required to produce those returns (high interest rates come with high default rates, so you…

Not sure how BlockFi works exactly but most lending DeFi apps have really high collateral requirements and liquidate positions in case of violation of collateral requirements charging a penalty to close open positions early and ensure protocol assets are preserved before a "default" event can ever happen.

They're not really "capital efficient".

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

#78

Post by AJ007 »

PragmaticPulp wrote: post #69

Where is the $100 million going to come from? Do they have that much money to spare? Or are their customers about to take a haircut? On that topic, where does BlockFi's profit come from? They're offering 9% (previously 12%) interest on deposits. Are they really re-loaning that money to other people at the 20-30% interest rate required to produce those returns (high interest rates come with high default rates, so you…

I think a lot of these yields from “crypto” are on paper, and it’s misleading the “defi” operators and their investors in to thinking they have huge returns. That’s the only way that would systematically explain lending tokens at very high interest rates.

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

#79

Post by vishnugupta »

ilamont wrote: post #70
vishnugupta wrote: post #64

Earlier quoted context omitted.

I have a vested interest in this domain now that I'm starting up in this space so am closely following these and related products. A whole bunch of these startups have sprung up; which take up real money (USDT or even USD, INR etc.,) promising very attractive guaranteed returns without locking up customers' fund. Look at these[1] for examples. Anyone who knows anything about banking in the traditional world knows how…

I have a vested interest in this domain now that I'm starting up in this space ... 99% of the money flowing into these are totally guidable and clueless people Is your startup going after the consumers? If most prospective customers are clueless, and many of the remaining customers are sharks or early investors looking for suckers, that doesn't bode well for new companies in this space, even the ones that are trying…

You are right in general. As you could guess from the tone of my comment, I want the ecosystem to be cleaned up and my startup is going to play a role in that. It is essential for crypto/DeFi to go mainstream. There is a big shakeup coming which will weed out all these get-rich-quick products.

Me and my co-founders are committing ourselves into this for the long haul (think ~10 years) so are taking it slow. We hope our deliberate, slow and steady approach will help us tide over the current short term bubble and the imminent burst.

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

#80

Post by frankbreetz »

wmf wrote: post #61

Some people have a "lightning doesn't strike twice" theory about the SEC where getting busted once means you can do the same thing 10x more in the future and won't be busted again. So a $100M fine today unlocks billions in "legitimate" profit tomorrow.

This seems like an insane theory, it's like saying if you commit an assault you won't be a suspect for murder later. Committing a crime generally make the authorities look at you more closely.
Post reply on HN