BlockFi Burned With $100 Million Fine
If there's one thing I love then it's bad news in the bitcoin and crypto space and of late, it's been stacking up thick and fast. The more uncertainty the more people look to get out for the "safety" of fiat lol, how ironic is that when bitcoin was designed to be safety from fiat.
Anyway, when people panic, I get to better leverage my third-world salary and pick up cheaper satoshis, and to me that's always a blessing.
Crypto used to be crazy but it's really graduated into the realm of the absurd with 100 million dollar hacks and fines all the time. In the latest round of so-called bad news, the world of unregulated securities and shadow banks we've seen crypto lender BlockFi forced to pay $100 million as a penalty for operating in the US an unregistered investment company.
According to the SEC company's interest accounts, which let users deposit and earn returns on cryptocurrencies like Bitcoin and Ethereum, were found to be unregistered securities.
This ruling is the first of its kind by the SEC who charged BlockFi with violating the registration provisions of the Investment Company Act of 1940.
What the settlement looks like
To settle with the SEC's BlockFi has agreed to pay a $50 million penalty and cease its unregistered offers and sales of the lending product, BlockFi Interest Accounts (BIAs). In addition, it needs to bring its business within the provisions of the Investment Company Act within 60 days.
In a separate action, BlockFi has also agreed to pay an additional $50 million in fines to 32 states to settle similar charges.
For any normal business, $100 million would be a crushing blow but in the world of overcapitalized crypto projects, BlockFi will ride this wave, I am sure they've made that and more in profit over the years so it's a slap on the wrist.
How blockFI makes money
As of March 31, 2021, BlockFi and its affiliates held approximately $14.7 billion in BIA investor assets, when you holding that much, you can broker big deals and secure profits. The company also rasied $508.7M from venture capital since its launch.
BlockFi was pulling most of its profits by lending their holdings to exchanges to fund leverage trading while they were also picking up the GBTC premium as it traded well below NAV for many months.
Silicon valley theory move fast and break things
BlockFI has been around since 2017 and through its BIAs, investors lent crypto assets to BlockFi in exchange for the company's promise to provide a variable monthly interest payment.
The order against BlockFi said that the company made misleading statements for more than two years on its website concerning the level of risk in its loan portfolio and lending activity.
Fixing things you break
After the order, the company has to come into compliance and has announced BlockFi Yield (BY), which is anticipated to be the first SEC-registered crypto interest-bearing security.
"We intend for BlockFi Yield to be a new, SEC-registered crypto interest-bearing security, which will allow clients to earn interest on their crypto assets," said Zac Prince, CEO, and Founder of BlockFi.
Keep your keys save your stress
I used to be a user of BlockFi in the early days, but I've grown to dislike the way they do business and shut down my account. I don't see the point of taking on third-party risk for 2-5% returns on your holdings, it's honestly not worth it.
I would much rather have my coins yielding nothing but in my possession. I think chasing these returns is pure greed and people are going to get burned in CEFI just like they do with these patched-up smart contract DEFI.
No ones obviously going to listen until they get burned but I won't be one of them.
Sources:
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Electronic-terrorism, voice to skull and neuro monitoring on Hive and Steem. You can ignore this, but your going to wish you didnt soon. This is happening whether you believe it or not. https://ecency.com/fyrstikken/@fairandbalanced/i-am-the-only-motherfucker-on-the-internet-pointing-to-a-direct-source-for-voice-to-skull-electronic-terrorism
I've also requested my account be closed but they don't make it easy. Gone are the days where there used to be a "delete account" button on these sites!
You are the product, if we can't leverage your funds we will leverage your data, FEW!!!!!
I have not used this myself. But I don’t mind earning some interest on my crypto provided it’s not very risky. I put in some HBD in saving and it’s giving me 12% return which is great.
There is no risk free reward, you're just discounting the risk of that 12%
It's nuts how the SEC is policing all this stuff and banging them with huge fees which never goes back to help the supposed "victims"..... they are always just out there running a fundraiser for themselves.
I'm glad Ripple Labs is fighting them even though I have never considered XRP to be like the other cryptos.
Just another slap on the wrist for these companies is the price of doing business, the SEC is just another mafia institute that doesn't really protect the consumer its all about lining their own pockets, as for Ripple labs lol I can't say who I detest more
Mafia institute is a very appropriate description. Sad but true