The Alabama Securities Commission (ASC) has accused cryptocurrency lending service BlockFi of selling unregistered securities in violation of US law.
Alabama became the second US state to express concern about BlockFi’s activities. The New Jersey Attorney’s Office already issued an order this week for BlockFi to stop serving new clients in the state.
Following this, ASC Chairman Joseph Borg issued a justification order addressed to BlockFi. According to this order, within 28 days, BlockFi’s management is obliged to provide an explanation of why the service is selling unregistered securities in Alabama.
The agency claims that BlockFi’s interest-bearing accounts are securities, and at their expense, the service managed to raise at least $ 14.7 billion from around the world.According to the ASC, BlockFi, along with its affiliates BlockFi Lending and BlockFi Trading, finances trading operations and cryptocurrency lending transactions for account of funds received from the sale of unregistered securities. This violates US securities laws. The regulator said in a statement that BlockFi is positioning itself as a regulated service, but it did not inform investors about its lack of registration with ASC or any other securities regulator.
“With the latest technology shaping new financial boundaries, Alabama recently developed new rules to regulate digital currencies. Unlike traditional regulated banks and brokerage firms, cryptocurrency investors are not insured or protected by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC). ASC is committed to making Alabamans aware of the risks of this new financial space. Decentralized financial platforms that operate without a license or registration pose a high level of risk for investors, ”Borg said.
BlockFi executives tweeted that they have already received an order from the ASC and entered into dialogue with regulators around the world, including the ASC. The firm remains committed to the position that its products are legal and suitable for cryptocurrency market participants. In June, BlockFi launched the BlockFi Prime trading platform for institutional investors and high net worth individuals.