An interest account was ruled an unregistered security

Inherited archive entry · retained from the earlier edition. Its factual, legal and policy claims have not all been reverified for 19 September 2026. Research scope.

What the order found

On 14 February 2022, the SEC issued a cease-and-desist order against BlockFi Lending LLC, finding that its BlockFi Interest Accounts, through which investors lent crypto assets to BlockFi in exchange for a variable monthly interest payment, were unregistered securities, both as notes and as investment contracts. The order states that as of December 2021, BlockFi held approximately $10.4 billion in BIA investor assets across roughly 572,000 investors, including 391,000 in the United States. The SEC's accompanying press release confirms a $100 million combined penalty, $50 million to the SEC and $50 million to a group of state regulators, and requires BlockFi to stop offering the product to new US investors and pursue registration of a successor.

How the product actually worked

BlockFi paid interest by lending out the crypto assets it borrowed from BIA investors, generating yield through loans to institutional and corporate borrowers, US-dollar lending, and its own equities and futures positions. The order finds BlockFi represented on its website that these institutional loans were 'typically' over-collateralised when, in fact, only 16 to 24 per cent were in any given year between 2019 and 2021, a gap between the stated and actual collateral levels the order treats as a material misrepresentation, separate from the registration violation itself.

Why yield is a credit exposure, not a service fee

An interest rate paid on deposited crypto is not a neutral fee for storage; it is compensation for the risk that whoever borrowed the assets, directly or through a chain of institutional loans, might not repay. The BlockFi order describes exactly this structure: investor assets pooled, lent onward at BlockFi's discretion, with the promised interest rate dependent on the yield BlockFi could actually extract from its borrowers. An investor accepting that yield accepts BlockFi's own credit risk and the credit risk of BlockFi's borrowers, layered on top of whatever price risk the underlying crypto asset already carries, whether or not the product is marketed using the language of a bank account.

Questions to carry forward

• Does a stated interest rate on deposited crypto disclose who ultimately borrows the funds and on what collateral terms?
• Is a claimed collateralisation level independently verifiable, or only described in the platform's own marketing?
• What distinguishes a registered, disclosed lending product from one operating without registration?

The order does not find that BlockFi customers were owed money they never received at the time of the settlement; it finds that the product paying them yield was an unregistered security, sold with a materially overstated description of its own collateral practices.