BlockFi fined more than $900K by Iowa as part of broader US regulatory settlement

Crypto lending firm BlockFi has received another consent order from a state agency for offering and selling securities without registering as a broker-dealer.

Iowa's Insurance Division has ordered the firm pay a $943,396.22 fine as part of a broader settlement with securities regulators across the US announced in February.

BlockFi's offerings have drawn scrutiny from securities regulators, both on the federal level and from state agencies. The firm's interest account product acts a savings account with higher rates of return than traditional high-yield savings accounts. It provides that return by lending out funds deposited on its platform, similar to banks.

BlockFi contends the product does not constitute a security and is hoping the settlements will provide a path to registration for its products. Securities and Exchange Commission (SEC) chair Gary Gensler has taken a closer look at crypto lenders and pointed to the area as one of interest for the agency.

The SEC has already sought to take the firm to task and regulators in New Jersey, Alabama, Texas, Kentucky and Vermont have also taken action against the firm.

Iowa's consent order is part of a multi-state investigation with the SEC and state securities regulators from 53 jurisdictions that make up the North American Securities Administrators Association (NASAA), according to the release. That investigation confirms that BlockFi will pay $50 million to the 53 jurisdictions and $50 million to the SEC in fines in a $100 million settlement with the SEC.

The Iowa consent order alleges BlockFi misrepresented the level of risk in its loan portfolio in addition to selling unregistered securities.

"Specifically, BlockFi stated in multiple website posts that its institutional loans were 'typically' over-collateralized when in fact most loans were not over-collateralized," said the order. 

According to the order, less than a quarter of the loans were over-collateralized in 2019, and less than 20% in 2020 and 2021.