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

sec.gov

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

#131

Post by AlexandrB »

z16a wrote: post #104
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…

Please clearly articulate how Blockfi is a scheme or a scam.

It's in the article:

> The order also finds that BlockFi made a false and misleading statement for more than two years on its website concerning the level of risk in its loan portfolio and lending activity.

Just because a scam hasn't imploded yet, doesn't mean it's not a scam.

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

#132

Post by sbierwagen »

thebean11 wrote: post #87
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.

Check out the interest rates on their crypto accounts: https://blockfi.com/rates/

A guaranteed 9.25% APY on crypto deposits when US dollar savings accounts at FDIC banks do 0.50% is odd. Where is the extra money coming from?

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

#133

Post by sincerely »

anonporridge wrote: post #130
aaaaaaaaata wrote: post #62

Earlier quoted context omitted.

What was/is(?) fraudulent about it, from the perspective of a single citizen who invested?

I never said fraudulent. Just an unregistered security, which is potentially illegal because the Ethereum foundation that sold and profited off the initial premined tokens to the public without proper disclosure required of a legal security sale. The result is that we now have no idea how much insider trading actually went on in that premine sale. For example, it could be the case that most Ethereum is secretly contr…

Ok, you didn't call it fraudulent, you called it fraud - is that not a distinction without a difference?

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

#134

Post by thebean11 »

sbierwagen wrote: post #132
thebean11 wrote: post #87

Earlier quoted context omitted.

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.

Check out the interest rates on their crypto accounts: https://blockfi.com/rates/ A guaranteed 9.25% APY on crypto deposits when US dollar savings accounts at FDIC banks do 0.50% is odd. Where is the extra money coming from?

According to them they lend the money out to institutions and traders. Margin rates can be pretty high.

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

#135

Post by BLKNSLVR »

jgalt212 wrote: post #118
ryanSrich wrote: post #109

Earlier quoted context omitted.

Conflating anything related to crypto as a scam is just lazy and anti-intellectual. This is one of HN's weakest traits IMO. I find great value in following topics and threads on HN, but it's unrelenting hate for crypto and crypto adjacent topics is unfounded.

In general I agree, but there's just so much damn smoke.

How much smoke billows off Wall Street though? Didn't that particular garbage fire get re-lit surprisingly soon after the GFC?

I'm somewhat pro-crypto for it's anti-establishment roots (which are barely visible these days) and so I find it interesting that the standard it's held to is much higher than that for existing 'finance' - for which the bar is incredibly low, seemingly for the only reason that society has developed a callous against all that (g)rubbing.

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

#136

Post by discodave »

celticninja wrote: post #45
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.

Do you have any examples of non-crypto companies trying to spin a $100MM fine as "pioneering efforts in securing regulatory clarity"?

I know companies spin, but this is next level.

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

#137

Post by BLKNSLVR »

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?

I think the more pertinent question is 'does it work for big fin employees?'

As regards the other comment re:lobbying, my answer to the above would be: it may exist, but it doesn't do much work.

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

#138

Post by discodave »

cdiddy2 wrote: post #100
5350-uiop-1130 wrote: post #84

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 thes…

Compound and Aave both existed before they had tokens and there was still yield on the platforms. The yield is from borrowers paying interest to the lenders.

Where are the borrowers investing the tokens to generate profit to pay interest to the lenders?

Like, are they investing in real estate that pays rent? Companies that pay dividends?

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

#139

Post by yellow_postit »

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…

Loans have max 50% LTV and their loan rates are at least 4.5%.

They must be reinvesting elsewhere similar to other bank models just a lot riskier, more opaque, and less regulation (for now).

They’ve meaningfully cut interest rates over time as well often in response to market volatility.

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

#140

Post by AlexandrB »

thebean11 wrote: post #134
sbierwagen wrote: post #132

Earlier quoted context omitted.

Check out the interest rates on their crypto accounts: https://blockfi.com/rates/ A guaranteed 9.25% APY on crypto deposits when US dollar savings accounts at FDIC banks do 0.50% is odd. Where is the extra money coming from?

According to them they lend the money out to institutions and traders. Margin rates can be pretty high.

That's how banks make money too. However, banks must also consider the risk of their debtors defaulting on their loans. They pass those risks on to you in the form of very low interests rates on money deposited, while keeping your deposit "safe". It seems like BlockFi was passing the risk on in the form of an undisclosed risk of losing all your money. That's the part the SEC seems to have a problem with:

> The order also finds that BlockFi made a false and misleading statement for more than two years on its website concerning the level of risk in its loan portfolio and lending activity.

The point is there's no free lunch. If you're making 9+% on your deposit don't be surprised if your account is wiped out when BlockFi's debtors fail to pay.

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