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Here is the full quote from the SEC statement (in case you missed it when you read the statement): > The order also finds that BlockFi made a false and mislead

Here is the full quote from the SEC statement (in case you missed it when you read the statement): > The order also finds that BlockFi made a false and misleading statement for more than two years on its website concerning the level of risk in its loan portfolio and lending activity. > Without admitting or denying the SEC’s findings, BlockFi agreed to a cease-and-desist order prohibiting it from violating the registration and antifraud provisions of the Securities Act and the registration provisions of the Investment Company Act. BlockFi also agreed to cease offering or selling BIAs in the United States.

vinniejames 5y ago
- capableweb 5y ago
  I'm not 100% sure, as I don't work for the SEC and don't have any special insights into this case. But I'll make a guess and say that they probably downplayed the risks in one way or another on their website, compared to statements made to the SEC. Let's say they say "It's risk-free!" on their website while in a statement to the SEC they say "There is a small risk customer lose their funds if X happens".
  - vinniejames 5y ago
    - davidgerard 5y ago
      > The order finds that BIAs are securities under applicable law
    - capableweb 5y ago
      It's not just about misleading claims, but also that BlockFi broke regulations by doing "unregistered offers and sales of the lending product" and "operated for more than 18 months as an unregistered investment company". In other words, BlockFi failed to do the bare minimum to run a financial investment service, and are now getting punished for it. That doesn't sound like a overreach to me. And yeah, in general, laws are usually interpreted subjectively, as laws usually give some wiggle-room to make sure it covers enough ground without having to write 1000 pages about every single edge-case.
      - toolz 5y ago
        If you follow crypto regulatory clarity with even the smallest curiosity you'll find these crypto companies are _begging_ the SEC and IRS to be more clear so they can comply to existing laws. This hugely successful company wants to exist legally and understand the laws that apply to them. This much has been obvious for a long time now.
    - shafyy 5y ago
      > The SEC simply wants to expand their regulatory power outside of what they are permitted to do and is flexing on a big player for the media attention. No, they are not. The SEC's goal is to protect consumers and the general public, and like most other regulatory agencies, have been doing a good job at it. I feel like there is a growing distrust in the government (at least in the US) and this is not a good thing. If you don't like what the SEC is doing, get involved in a democractic way (voting, organizing, etc.) and change it.
    - shrikant 5y ago
      What sort of "intellectual DDoS" is this -- reeks of disingenuity. Page 9 of the PDF of the actual order (linked on the page under "SEC Order") explains how BlockFi made misleading claims: > From March 2019 through August 2021, BlockFi misrepresented on its website that its institutional loans were “typically” over-collateralized, when in fact, most institutional loans were not. Accordingly, although BlockFi made other disclosures on its website concerning its risk management practices, BIA investors did not have complete and accurate information with which to evaluate the risk that, in the event of defaults by BlockFi’s institutional borrowers, BlockFi would be unable to comply with its obligation to pay BIA investors the stated interest rates or return the loaned crypto assets to investors upon demand. This false and misleading statement was in the offer and sale of BIAs, and as such was in the offer and sale of securities.
    - coffeefirst 5y ago
      I'm guessing you don't know a whole lot of people who work in government. They do not value media attention. They're not politicians, and that's not how any of this works.
- davidgerard 5y ago
  https://www.sec.gov/litigation/admin/2022/33-11029.pdf https://www.sec.gov/litigation/admin/2022/33-11029.pdf
- smoe 5y ago
  > 22. BlockFi made a material misrepresentation to BIA investors concerning the level of risk in its loan portfolio. Beginning at the time of the BIA launch on March 4, 2019 and continuing to August 31, 2021, BlockFi made a statement in multiple website posts that its institutional loans were “typically” over-collateralized, when in fact, most institutional loans were not. When BlockFi began offering the BIA investment, it intended to require over-collateralization on a majority of its loans to institutional investors, but it quickly became apparent that large institutional investors were frequently not willing to post large amounts of collateral to secure their loans. Approximately 24% of institutional crypto asset loans made in 2019 were overcollateralized; in 2020 approximately 16% were over-collateralized; and in 2021 (through June 30, 2021) approximately 17% were over-collateralized. As a result, BlockFi’s statement materially overstated the degree to which it secured protection from defaults by institutional borrowers through collateral. Through operational oversight, BlockFi’s personnel failed to take steps to update the website statement to accurately reflect the fact that most institutional loans were not over-collateralized https://www.sec.gov/litigation/admin/2022/33-11029.pdf https://www.sec.gov/litigation/admin/2022/33-11029.pdf

vinniejames 5y ago

capableweb 5y ago
I'm not 100% sure, as I don't work for the SEC and don't have any special insights into this case. But I'll make a guess and say that they probably downplayed the risks in one way or another on their website, compared to statements made to the SEC. Let's say they say "It's risk-free!" on their website while in a statement to the SEC they say "There is a small risk customer lose their funds if X happens".
- vinniejames 5y ago
  - davidgerard 5y ago
    > The order finds that BIAs are securities under applicable law
  - capableweb 5y ago
    It's not just about misleading claims, but also that BlockFi broke regulations by doing "unregistered offers and sales of the lending product" and "operated for more than 18 months as an unregistered investment company". In other words, BlockFi failed to do the bare minimum to run a financial investment service, and are now getting punished for it. That doesn't sound like a overreach to me. And yeah, in general, laws are usually interpreted subjectively, as laws usually give some wiggle-room to make sure it covers enough ground without having to write 1000 pages about every single edge-case.
    - toolz 5y ago
      If you follow crypto regulatory clarity with even the smallest curiosity you'll find these crypto companies are _begging_ the SEC and IRS to be more clear so they can comply to existing laws. This hugely successful company wants to exist legally and understand the laws that apply to them. This much has been obvious for a long time now.
  - shafyy 5y ago
    > The SEC simply wants to expand their regulatory power outside of what they are permitted to do and is flexing on a big player for the media attention. No, they are not. The SEC's goal is to protect consumers and the general public, and like most other regulatory agencies, have been doing a good job at it. I feel like there is a growing distrust in the government (at least in the US) and this is not a good thing. If you don't like what the SEC is doing, get involved in a democractic way (voting, organizing, etc.) and change it.
  - shrikant 5y ago
    What sort of "intellectual DDoS" is this -- reeks of disingenuity. Page 9 of the PDF of the actual order (linked on the page under "SEC Order") explains how BlockFi made misleading claims: > From March 2019 through August 2021, BlockFi misrepresented on its website that its institutional loans were “typically” over-collateralized, when in fact, most institutional loans were not. Accordingly, although BlockFi made other disclosures on its website concerning its risk management practices, BIA investors did not have complete and accurate information with which to evaluate the risk that, in the event of defaults by BlockFi’s institutional borrowers, BlockFi would be unable to comply with its obligation to pay BIA investors the stated interest rates or return the loaned crypto assets to investors upon demand. This false and misleading statement was in the offer and sale of BIAs, and as such was in the offer and sale of securities.
  - coffeefirst 5y ago
    I'm guessing you don't know a whole lot of people who work in government. They do not value media attention. They're not politicians, and that's not how any of this works.
davidgerard 5y ago
https://www.sec.gov/litigation/admin/2022/33-11029.pdf https://www.sec.gov/litigation/admin/2022/33-11029.pdf
smoe 5y ago
> 22. BlockFi made a material misrepresentation to BIA investors concerning the level of risk in its loan portfolio. Beginning at the time of the BIA launch on March 4, 2019 and continuing to August 31, 2021, BlockFi made a statement in multiple website posts that its institutional loans were “typically” over-collateralized, when in fact, most institutional loans were not. When BlockFi began offering the BIA investment, it intended to require over-collateralization on a majority of its loans to institutional investors, but it quickly became apparent that large institutional investors were frequently not willing to post large amounts of collateral to secure their loans. Approximately 24% of institutional crypto asset loans made in 2019 were overcollateralized; in 2020 approximately 16% were over-collateralized; and in 2021 (through June 30, 2021) approximately 17% were over-collateralized. As a result, BlockFi’s statement materially overstated the degree to which it secured protection from defaults by institutional borrowers through collateral. Through operational oversight, BlockFi’s personnel failed to take steps to update the website statement to accurately reflect the fact that most institutional loans were not over-collateralized https://www.sec.gov/litigation/admin/2022/33-11029.pdf https://www.sec.gov/litigation/admin/2022/33-11029.pdf