In what is set to be one of the toughest penalties against a cryptocurrency firm, details have now emerged that the foremost crypto lending platform, BlockFi, is set to pay a fine of $100 million to the Securities and Exchange Commission (SEC) of the United States government.
The company decided to pay the fine in a bid to settle an ongoing investigation into its activities by the commission.
BlockFi to stop new accounts creation
The investigation began following allegations that the firm was illegally offering a product that pays customers high-interest rates to lend out their digital tokens, according to people familiar with the matter.
Aside from the payment of this fine, Bloomberg reported that the firm would also stop creating new high-yield accounts for residents in the United States.
Speaking on the development, the company’s spokesperson, Madelyn McHugh, insisted that they would not comment on market rumors. However, McHugh confirmed that the assets of its clients were still safe on the platform
BlockFi offers customers high-interest rates for locking up their crypto assets like Bitcoin ( $20,335.00 ) , Ethereum ( $1,116.94 ) , and Tether into traditional bank-like savings accounts. These crypto-assets are then loaned out at higher rates to other clients. According to the SEC, the actions of BlockFi counts as exposing its US clients to unregistered securities.
The SEC was forced to launch an investigation into BlockFi operations when regulators in Alabama, Kentucky, New Jersey, Texas, and Vermont issued a cease and desist order and show cause to the crypto firm. This action spurred the federal regulator into investigating how BlockFi operates its business.
Notably, this is not the first time that the SEC has reacted strongly to cases of crypto lending. In one of our earlier reports, we revealed that Coinbase was forced to cancel its plans for a similar service after the Gary Gensler-led commission threatened to sue the crypto exchange if it went ahead with its plan.
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