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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

#31

Post by latchkey »

ivalm wrote: post #12
vinniejames wrote: post #6

Earlier quoted context omitted.

Quoted post unavailable.

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 big APYs.

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

#32

Post by duxup »

arcticbull wrote: post #28
maerF0x0 wrote: post #2

Good for the SEC and for BlockFi for keeping these kinds of things in the public purview. I hate how the FDA has so little teeth, comparatively. Eg: https://peckford42.wordpress.com/2021/10/05/pfizer-covering-...

It's just too bad that the SEC's fines are small enough that companies can absorb them. Feels more like they're getting their beaks wet. They need to impose significantly higher penalties and even dissolve the business if appropriate.

Provided we're not talking about an economy crashing act. Fines probably should be lower than "can't absorb them".

The prospect of the SEC crashing every rando company with fines isn't great. Lotta people hurt who had nothing to do with it.

I worked at a company that pulled some illegal stuff with backdating stock awards and so on. CEO actually went to jail. I'm glad I still had a job and the company rolled on, our customers were probably happy too.

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

#33

Post by [deleted] »

duxup wrote: post #32
arcticbull wrote: post #28

Earlier quoted context omitted.

It's just too bad that the SEC's fines are small enough that companies can absorb them. Feels more like they're getting their beaks wet. They need to impose significantly higher penalties and even dissolve the business if appropriate.

Provided we're not talking about an economy crashing act. Fines probably should be lower than "can't absorb them". The prospect of the SEC crashing every rando company with fines isn't great. Lotta people hurt who had nothing to do with it. I worked at a company that pulled some illegal stuff with backdating stock awards and so on. CEO actually went to jail. I'm glad I still had a job and the company rolled on, our c…

[deleted]

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

#34

Post by vinniejames »

capableweb wrote: post #25
vinniejames wrote: post #10

Earlier quoted context omitted.

Quoted post unavailable.

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".

No post body was provided.

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

#35

Post by SilasX »

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.

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

#36

Post by capableweb »

SilasX wrote: post #30
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.

Not sure the relevance, or how this story would remind you of that program, since BlockFi doesn’t issue a token, nor was the product in question secret. Disclosure: used BlockFi’s lending program and had pulled out most of my holdings for unrelated reasons by last week.

Agreed. The SEC claims it broke regulations by doing "unregistered offers and sales of the lending product", "operated for more than 18 months as an unregistered investment company" and "false and misleading statement for more than two years on its website concerning the level of risk", none of which would be exposed by a whistleblower but instead by just going to their website or having an account there. Nothing that requires someone from inside the company to whistleblow anything.

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

#37

Post by davidgerard »

vinniejames wrote: post #10
capableweb wrote: post #9

Earlier quoted context omitted.

Here is the full quote from the SEC statement (in case you missed it when you read the statement): > 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. > Without admitting or denying the SEC’s findings, BlockFi agreed to a cease-and-desist order prohibiting it from violating the registr…

Quoted post unavailable.

https://www.sec.gov/litigation/admin/2022/33-11029.pdf

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

#38

Post by davidgerard »

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 order finds that BIAs are securities under applicable law

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

#39

Post by maerF0x0 »

duxup wrote: post #32
arcticbull wrote: post #28

Earlier quoted context omitted.

It's just too bad that the SEC's fines are small enough that companies can absorb them. Feels more like they're getting their beaks wet. They need to impose significantly higher penalties and even dissolve the business if appropriate.

Provided we're not talking about an economy crashing act. Fines probably should be lower than "can't absorb them". The prospect of the SEC crashing every rando company with fines isn't great. Lotta people hurt who had nothing to do with it. I worked at a company that pulled some illegal stuff with backdating stock awards and so on. CEO actually went to jail. I'm glad I still had a job and the company rolled on, our c…

I think by "absorb" the poster meant "Pay the fine and still make a profit from the fine inducing activity"

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

#40

Post by w_TF »

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.

The source(s) of the yield they were promising were extremely dubious and unsafe, the same can be said for Celsius.

When they tell you your crypto is being lent to "institutional investors" what they really mean to say is they're gambling with your crypto in defi protocols, and you can see this happening on-chain.

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