This class action brings suit against a number of BlockFi entities—BlockFi, its parent BlockFI, Inc. (BFI), and affiliates BlockFi Trading, LLC and BlockFi Lending, LLC, for their BlockFi Interest Accounts or Crypto Interest Accounts (BIAs). The complaint alleges BIAs are unregistered securities that should have been registered with the Securities and Exchange Commission (SEC) and the New Jersey Bureau of Securities.
The class for this action is all persons or entities in the US who bought or enrolled in a BIA.
BFI is described in the complaint as “a financial service company that generates revenue through cryptocurrency trading, lending, and borrowing, as well as engaging in proprietary trading.”
In March 2019, BlockFi began selling BIAs to investors, the complaint says, via the deposit of certain kinds of cryptocurrency in the accounts. The investors thus lent the crypto assets to BlockFi, while BlockFi provided the investors with a variable interest payment on the account.
The complaint alleges, “BlockFi generated the interest paid out to BIA investors by deploying its assets in various ways, including loans of crypto assets made to institutional and corporate borrowers, lending U.S. dollars to retail investors, and by investing in equities and futures.”
As of March 31, 2021, the complaint claims, the BlockFi entities held $14.7 billion from selling these unregistered securities.
The complaint alleges the BIAs are notes according to the description in an earlier case, “and also because BlockFi offered and sold the BIAs as investment contracts…”
The complaint further claims, “BlockFi promised BIA investors a variable interest rate … in exchange for crypto assets loaned by investors, who could demand that BlockFi return their loaned assets at any time. … Investors in the BIAs had a reasonable expectation of obtaining a future profit from BlockFi’s efforts in managing the BIAs…. Investors also had a reasonable expectation that BlockFi would use the invested crypto assets in BlockFi’s lending and principal investing activity, and that investors would share profits in the form of interest payments…”
In addition, the complaint alleges that BlockFi sold the BIAs to the general public and “promoted the BIAs as an investment.”
For all these reasons, the complaint alleges that the BIAs were unregistered securities and that the BlockFi entities have violated the Securities Act of 1933. In fact, the complaint alleges, the New Jersey Bureau of Securities issued a cease and desist order to BFI and its two affiliates on or around July 20, 2021.
In February 2022, the SEC also charged the companies with failing to register the offers and sales of its “crypto lending product.” BlockFi agreed to a settlement requiring it to pay a penalty of $50 million, stop its unregistered activities, and attempt to comply with the Investment Company Act within sixty days. It also agreed to another $50 million in fines in various states.
Article Type: LawsuitTopic: Investments
Most Recent Case Event
BlockFi Crypto Interest Accounts Are Unregistered Securities, Says Complaint
March 17, 2022
This class action brings suit against a number of BlockFi entities—BlockFi, its parent BlockFI, Inc. (BFI), and affiliates BlockFi Trading, LLC and BlockFi Lending, LLC, for their BlockFi Interest Accounts or Crypto Interest Accounts (BIAs). The complaint alleges BIAs are unregistered securities that should have been registered with the Securities and Exchange Commission (SEC) and the New Jersey Bureau of Securities.
BlockFi Crypto Interest Accounts Are Unregistered Securities, Says ComplaintCase Event History
BlockFi Crypto Interest Accounts Are Unregistered Securities, Says Complaint
March 17, 2022
This class action brings suit against a number of BlockFi entities—BlockFi, its parent BlockFI, Inc. (BFI), and affiliates BlockFi Trading, LLC and BlockFi Lending, LLC, for their BlockFi Interest Accounts or Crypto Interest Accounts (BIAs). The complaint alleges BIAs are unregistered securities that should have been registered with the Securities and Exchange Commission (SEC) and the New Jersey Bureau of Securities.
BlockFi Crypto Interest Accounts Are Unregistered Securities, Says Complaint