SEC Slaps $100 Million Penalty on Dapp in Its Largest-Ever Fine

The regulatory authority in a press release today announced its decision to impose the penalty, making it not only the first-ever crypto lending dApp penalty but also its biggest fine in forever.

The decentralized lending protocol BlockFi has since come up with its own plan to deal with this.

SEC’s $100 Million Fine

The Securities and Exchange Commission today charged BlockFi LLC for violating the Investment Company Act of 1940 and the decentralized protocol itself announced that their will also be registering the LLC under the Securities Act of 1933.

The condition which SEC placed under these charges is that BlockFi is required to $50 million in penalties to the SEC and an additional $50 million in fines to the 32 states in the country where it faces similar charges.

The SEC Chair Gary Gensler stated in the press release:

“Today’s settlement makes clear that crypto markets must comply with time-tested securities laws, such as the Securities Act of 1933 and the Investment Company Act of 1940. It further demonstrates the Commission’s willingness to work with crypto platforms to determine how they can come into compliance with those laws.”

As per the regulatory body, BlockFi had been selling BlockFi Interest Accounts (BIAs) to enable investors to lend crypto-assets such as Bitcoin, Ethereum, etc into the exchange.

On the same, the DeFi protocol offered a monthly interest payment which was granted at the rate of 9.25% APY. 

However, because the lending platform was running as an unregistered investment company for more than 18 months, it came under the SEC’s gavel.

However, as per the SEC, the company agreed to a cease-and-desist order which included ceasing the selling of BIAs in the United States.

BlockFi Responds Peacefully

In a letter from their founders, BlockFi stated that they intend on continuing operating, with some exceptions for the US-based clients. All other non-US clients remain unaffected by these changes. 

The founders also said:

“We were the first crypto company to receive a state-level license to issue crypto-backed loans to U.S. consumers in 2018 and this is the next major example of how we prioritize cooperation with regulators. 

With today’s resolution, we are leading the creation of a new regulatory landscape for crypto and our clients. As we shared earlier, we intend to file or confidentially submit a registration statement to the SEC for BlockFi Yield, a new crypto interest-bearing security.”

This particular instance will certainly serve as a mile step for crypto companies, as the SEC could rain down harder the next time