BlockFi Receives Fifth ‘Cease-and-Desist’ From Kentucky Financial Regulator

BlockFi Receives Fifth ‘Cease-and-Desist’ From Kentucky Financial Regulator

The Kentucky Department of Financial Institutions has become the fifth state regulator to order BlockFi to cease offering new customers access to its Interest Account service.

Kentucky’s Division of Securities ordered the crypto lender to stop opening new accounts in the Bluegrass State. Kentucky joins New Jersey, Alabama, Vermont and Texas in alleging that BlockFi Interest Accounts (BIAs) violate state securities laws.

“‘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,” the regulator said in a press release.

In response, BlockFi announced it would “immediately” stop signing on new customers in Kentucky.

Existing customers remain unaffected, much like how similar orders have played out in the other states where BlockFi received cease-and-desist orders.

The company has come under fire on allegations that BIAs violate securities laws because customers pool their funds with the company, which then lends them to generate profit.

BlockFi, for its part, has maintained that in its view, BIAs do not violate securities laws in any of the states it operates in.

Many of the state regulators pursuing allegations against BlockFi have given the company 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 its regulatory woes, the company is still pursuing a $500 million Series E funding round ahead of a possible public offering, according to documents reviewed by CoinDesk. While the round was anticipated to close earlier this week, it’s unclear whether it has done so.


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