The regulator of the US state of Iowa (IID), after an investigation by the US Securities and Exchange Commission (SEC) and other regulators, demanded that BlockFi pay an administrative fine of about $1 million.
According to Iowa Insurance Commissioner Doug Ommen, cryptocurrency lending service BlockFi will have to pay $943,396.22 to list and sell securities without proper registration and regulatory approval.
In addition, the regulator ordered the company to immediately stop working in the state. Regulators must protect residents from any investment that does not have a legal basis, Ommen said. He urged Iowans to check the license of any investment platform through IID before investing in it.
“While innovations such as cryptocurrencies can enable the growth and development of the financial system, it is important that regulators provide this within an appropriate framework that protects investors and at the same time promotes responsible capital formation,” he said.
IID alleges that BlockFi misled users by claiming that its institutional loans are over-collateralized, although this is not the case, according to investigations. This situation has led Iowans to invest their money in a platform that offers speculative investments without informing their customers, Ommen said.
BlockFi’s fine order comes after a multi-state investigation involving the SEC and other state securities regulators from 53 jurisdictions. In February, regulators determined that BlockFi must pay up to $50 million in damages to the SEC and another $50 million to US states that have made similar allegations.
In early June, BlockFi’s valuation fell from $5 billion in 2021 to $1 billion due to multiple regulatory scrutiny of the company. The company has not yet made an official statement about the fine imposed by IID, but such a significant payment could seriously affect the stability of the company, which is going through hard times.
