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Oregon will receive nearly $1 million as part of a multi-state settlement with cryptocurrency financial institution BlockFi.
Following investigations led by a group of state securities regulators and the SEC, the Oregon Division of Financial Regulation (DFR) brought legal action against BlockFi for violations of the Oregon Securities Law. As part of its settlement with securities regulators, BlockFi agreed to pay a total of $100 million, half of which would go to the SEC and the other half to state securities regulators. BlockFi further agreed to stop offering BlockFi Interest Accounts (BIAs) in the U.S., and stop accepting additional deposits from U.S. customers to accounts that were already open.
BlockFi offered and sold securities in Oregon without being properly registered. In addition, BlockFi offered and sold BIAs to the public. Through BIAs, investors lent crypto assets to BlockFi in exchange for the company’s promise to provide a variable monthly interest payment. Investors deposited cryptocurrencies such as Bitcoin and Ethereum into accounts. BlockFi promised monthly interest rates of 6.2 percent, compounded each month with the possibility of earning up to 9.5 percent, depending on the type and size of investment. BlockFi told investors that loans were overcollateralized – having more collateral than is needed in order to reduce the risk to the investors – when, in fact, they were not. Approximately 24 percent of institutional digital asset loans made in 2019 were overcollateralized, 16 percent in 2020 and 17 percent through June 30, 2021. As a result, BlockFi materially overstated the degree to which it secured protection from defaults by institutional borrowers through collateral.
“Financial services powered by cryptocurrencies must be held accountable just like any other financial institution,” said DFR Administrator TK Keen. “I am happy with the outcome here and we will continue to monitor businesses that try to take advantage of Oregonians or do business here illegally.”
The settlement, which was finalized between BlockFi and DFR last week, orders BlockFi to stop offering or selling BIAs or any security that is not registered, qualified, or exempt to new investors in Oregon, to stop accepting further investments or funds in the BIAs by current Oregon investors, and to pay $943,396 to DFR.
Source: Oregon Division of Financial Regulation