BlockFi Gets $943,000 Fine After $100 Million Settlement

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  • BlockFi has been hit with a $943,000 fine by Iowa over its year-long securities battle
  • The lender agreed a $100 million settlement with the SEC and several regulators in February
  • The news comes in the same week it announced a 20% workforce reduction

BlockFi just can’t catch a break at the moment. The lending platform, which recently agreed to pay $100 million to settle its case against the SEC and the regulators, has now been hit with a near $1 million fine by the State of Iowa . The fine, revealed yesterday, adds to BlockFi’s woes at a time when it can least afford it, with suggestions that embattled hedge fund Three Arrows Capital might default on loans taken out from BlockFi, among others.

BlockFi’s Troubled Year

BlockFi’s woes in this matter began last July when New Jersey, Alabama and Texas all accused the lender of contravening securities laws by alleging that one of its instruments, the BlockFi Interest Account, illegally acted as a security. The case was settled in February when BlockFi agreed to pay up to $50 million in total to 53 jurisdictions following the investigation, as well as another $50 million to the SEC.

However, a further layer of icing was added to the cake yesterday when Iowa Insurance Commissioner Doug Ommen revealed that a consent order had been issued on June 8th in the shape of a $943,000 fine. The consent order found that in addition to offering and selling unregistered securities, BlockFi “made misrepresentations and omissions about the level of risk in its loan portfolio which did not allow investors to have complete and accurate information to evaluate the risk of the investment.”

The most egregious of these was the suggestion that BlockFi’s institutional loans were ““typically” over-collateralized when in fact most loans were not over-collateralized.”

Three Arrows Default Could Further Hurt Bottom Line

The need to pay over $100 million in settlements and now this new fine may have played a part in the severity of BlockFi’s job cuts, which it announced this week and saw 20% of its workforce cut ahead of what is shaping up to be another gruelling crypto winter.

Things could get worse for BlockFi however if they are exposed to hedge fund Three Arrows Capital, which is thought to be in financial trouble following liquidations worth some $400 million from several of the biggest crypto lending platforms in the space. If Three Arrows cannot meet its obligations then BlockFi could see more capital going down the drain in short order.