Crypto lending platform Blockfi is having a hard time. Now, the Iowa Insurance Division Fines is ordering it to pay almost $1 Million in fines.
BlockFi is far from having a peaceful season. Not only the crypto industry is suffering the hits of a bear market, now the crypto lending platform is facing a nearly $1 billion fine imposed by the State of Iowa which could have played a role in a recent decision to cut down its workforce to reduce administrative costs.
On June 14, the Iowa Insurance Division Fines (IID) ordered BlockFi to pay an administrative fine of over $943,000 for failing to register as a securities trading platform.
According to a statement issued by Doug Ommen, Iowa Insurance Commissioner, BlockFi will have to pay $943,396.22 for offering and selling securities in the State of Iowa without the proper registration and regulatory approval. In addition to that, they ordered the platform to cease operations immediately.
This fine follows a previous settlement in which Blockfi paid over $100 Million in penalties after failing to comply with the regulations related to its crypto lending product. The company paid the fine and restructured its operations shortly after.
Regulators Seek to Guarantee “Responsible” Investments
According to Ommen, regulators must protect residents from any investments that do not have an appropriate framework to guarantee “responsible” investment. That is why he calls on Iowans to corroborate the legality of any type of investment platform with the IID before engaging in any financial decision.
“While innovations, like cryptocurrencies, may provide for growth and evolution in the financial system, it is important that regulators ensure this occurs within an appropriate framework that protects investors while still facilitating responsible capital formation,”
The order followed a multi-state investigation involving the SEC and various state securities regulators from 53 jurisdictions. The regulators determined that BlockFi must pay settlements of up to $50 million to each jurisdiction, in addition to $50 million to the SEC.
As reported by CryptoPotato, on June 14, BlockFi announced the layoff of at least 20% of its more than 850 employees due to the “dramatic shift in macroeconomic conditions worldwide.”
IIDF: BlockFi’s Loans Were Not Overcollateralized
The Iowa Insurance Division Fines also argued that Blockfi lied to its customers. The lending platform claimed that its institutional loans were “typically” over-collateralized when, according to regulators’ investigations, they were not.
According to the Iowa Insurance Commissioner, this situation led Iowans to invest their money in a platform that offers speculative investments without informing its clients.
In early June, BlockFi’s valuation fell from over $5 billion in early 2021 to just $1 billion. This reflects the company’s problems facing a tight coordinated scrutiny from regulators.
Therefore, although the company has not yet made an official statement on the new payment order promoted by the IID, the significant figure could seriously affect its stability.