BlockFi, the crypto start up backed by Peter Thiel, has agreed to pay $100 million to the Securities and Exchange Commission and 32 states to settle charges related to its retail crypto lending product.
The company’s service, BlockFi Interest Accounts, let users accrue interest on holdings of bitcoin and other cryptocurrencies.
BlockFi says it is now applying to register with the SEC to offer a new crypto savings product, called BlockFi Yield.
BlockFi is backed by Silicon Valley investor Peter Thiel and offers a popular savings product that lets clients accrue interest on their digital currency holdings.
The company advertises annual percentage yields as high as 9.25% on its website. According to the firm, it is able to offer such rates as large institutional investors are willing to pay more to borrow the deposits.
The SEC had charged BlockFi with failing to register its retail crypto lending product, BlockFi Interest Accounts, and with violating the registration provisions of the Investment Company Act of 1940.
BlockFi will pay the SEC $50 million to settle the charges, without admitting or denying wrongdoing or liability. It will also pay a further $50 million to 32 states over similar charges.
“This is the first case of its kind with respect to crypto lending platforms,” SEC Chair Gary Gensler said. “Today’s settlement makes clear that crypto markets must comply with time-tested securities laws.”
BlockFi said U.S. customers will no longer be able to open new interest accounts with the firm. Clients can continue receiving interest on their existing holdings, but cannot add new assets to their accounts, the company 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,” BlockFi CEO and founder Zac Prince said in a statement.
“Today’s milestone is yet another example of our pioneering efforts in securing regulatory clarity for the broader industry and our clients, just as we did for our first product – the crypto-backed loan,” he added.
Gurbir S. Grewal, director of the SEC’s enforcement division, warned others that they “should take immediate notice of today’s resolution and come into compliance with the federal securities laws.”
Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.