Kentucky Orders BlockFi To Stop Opening New Accounts
Kentucky joins four other state regulator to claim that BlockFi’s interest service violates state securities laws.
The Kentucky Department of Financial Institutions, Division of Securities has ordered the crypto lender to stop opening new accounts in the Bluegrass State. Kentucky joins four other states: New Jersey, Alabama, Vermont and Texas in alleging that BlockFi Interest Accounts (BIAs) violate state securities laws.
Kentucky regulator commented in a press release:
“‘Blockfi’s website offers cryptocurrency lending and borrowing services through ‘Blockfi Interest Accounts’ (BIAs) advertised on its website. Through these accounts, investors may deposit certain cryptocurrencies with the company in exchange for a specified interest rate.’ The company has accepted nearly $15 billion in these accounts from investors.”
BlockFi responded that it would “immediately” stop signing on new customers in Kentucky.
Existing customers currently remain unaffected. Kentucky along with Texas filed for a cease-and-desist, while New Jersey, Alabama and Vermont have filed “show-cause” orders.
BlockFi has come under regulatory magnifying glass due to allegations that BIAs violate securities laws because customers pool their funds with the company, which then lends them to generate profit.
BlockFi persist that BIAs do not violate securities laws in any of the states it operates in.
Some of the state regulators going after BlockFi have given them an opportunity to provide evidence in support of its claim. New Jersey has given BlockFi until the beginning of September to respond, while Texas securities regulators have a hearing scheduled for early October.
Despite the regulatory issues, BlockFi is still pursuing a $500 million Series E funding round ahead of a possible public offering, according to CoinDesk. While the round was anticipated to close earlier this week, it’s unclear whether it has done so.
