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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

#81

Post by SilasX »

endorphine wrote: post #43
SilasX wrote: post #35

Earlier quoted context omitted.

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.

Sure, after you justify why you'd object to someone disclosing more bias than they have to. (And my comment throttling lets up.)

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

#82

Post by toolz »

capableweb wrote: post #41
vinniejames wrote: post #34

Earlier quoted context omitted.

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…

If you follow crypto regulatory clarity with even the smallest curiosity you'll find these crypto companies are _begging_ the SEC and IRS to be more clear so they can comply to existing laws.

This hugely successful company wants to exist legally and understand the laws that apply to them. This much has been obvious for a long time now.

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

#83

Post by pavlov »

jdrc wrote: post #58
pavlov wrote: post #4

The SEC has a whistleblower program that can award up to 30% of the fine to a whistleblower. Here's an example of someone receiving $32 million: https://www.sec.gov/news/press-release/2021-211 If crypto prices go down, it might become more lucrative for crypto employees to start talking to SEC rather than trying to sell their tokens. If you work at one of these places, why not start collecting documentation now.

Does the program also work for bigtech employees?

Any industry. But big tech tends to have less of a YOLO attitude to securities regulations. Public scrutiny is so high that crypto-style unvetted gray area products like Facebook's Libra don't have much change of succeeding.

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

#84

Post by 5350-uiop-1130 »

I've had trouble finding clear jargon-free sources to explain how these lending platforms and various defi lending platforms generate yield.

As far as I can tell it mostly works by token inflation. Celsius, Nexo tokens, Compound and Aave tokens for example.

But these tokens are given as a reward to yield farmers so there is a huge sell pressure and yet I don't understand who is on the buy side. Why would you buy these reward tokens. It seems strange to me.

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

#85

Post by nikanj »

Animats wrote: post #74

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 cov…

Luckily they can run the whole scheme from Elbonia, and people are more than happy to send over cryptos from the US.

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

#86

Post by dv_dt »

jdrc wrote: post #58
pavlov wrote: post #4

The SEC has a whistleblower program that can award up to 30% of the fine to a whistleblower. Here's an example of someone receiving $32 million: https://www.sec.gov/news/press-release/2021-211 If crypto prices go down, it might become more lucrative for crypto employees to start talking to SEC rather than trying to sell their tokens. If you work at one of these places, why not start collecting documentation now.

Does the program also work for bigtech employees?

Pragmatically, I would think that getting a whistleblower disclosure to stick would be more difficult with companies carrying a significant lobbying presence.

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

#87

Post by thebean11 »

Animats wrote: post #74

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 cov…

Is BlockFi a scam though? Fraud is not what they are getting fined for, and it sounds like they can continue to operate if they meet these reporting requirements, and that the company intends to do that.

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

#88

Post by yrral »

Here is SEC commissioner Hester Peirce's dissenting opinion:

https://www.sec.gov/news/statement/peirce-blockfi-20220214

Essentially she says that while they did misrepresent the over collateralization, a 100m fine is too much since they did fulfill their end of the loans.

Additionally, she says that the categorization this stuff as securities is not effective. US consumers want interest on their crypto-assets now, but with companies having to jump through complicated SEC hoops this type of product will not be available in the near future (or maybe never available); not because of "customer protection" issues but because of sec over-regulation issues.

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

#90

Post by kkielhofner »

yrral wrote: post #88

Here is SEC commissioner Hester Peirce's dissenting opinion: https://www.sec.gov/news/statement/peirce-blockfi-20220214 Essentially she says that while they did misrepresent the over collateralization, a 100m fine is too much since they did fulfill their end of the loans. Additionally, she says that the categorization this stuff as securities is not effective. US consumers want interest on their crypto-assets now, bu…

In the rotating door that is regulators and the industries they regulate she’s going to end up at a crypto company.
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