New Jersey Bureau of Securities, a state securities regulatory agency responsible for oversight of New Jersey State broker dealers and licensed investment advisors, has ordered the crypto trading and lending platform BlockFi to stop accepting new BlockFi Interest Accounts (BIA).
On Monday, July 19, Forbes, citing a draft press release, first reported that the New Jersey Bureau of Securities are preparing to issue a cease and desist order against BlockFi. The unpublished draft alleges that “BlockFi has been funding and facilitating its cryptocurrency lending and trading operations at least partly through the sale of unregistered securities.”
On Tuesday morning, July 20, BlockFi CEO Zac Prince confirmed the news that they had received an order from the New Jersey Bureau of Securities on Monday evening. On his Twitter account, he wrote:
Late Monday evening BlockFi received an order from the New Jersey Bureau of Securities regarding BlockFi Interest Account (BIA) operations in the State of New Jersey.
— Zac Prince (@BlockFiZac) July 20, 2021
“Late Monday evening BlockFi received an order from the New Jersey Bureau of Securities regarding BlockFi Interest Account (BIA) operations in the State of New Jersey.”
According to Zac, the order calls for BlockFi to stop accepting new BlockFi Interest Account (BIA) clients residing in New Jersey beginning July 22, 2021. He said that the services for existing clients was fully functional.
Zac further said that BlockFi’s BIA services are fully lawful and not securities. He tweeted:
“BlockFi is engaged in an ongoing dialogue with regulators to help them understand our products, which we believe are lawful and appropriate for crypto market participants. BIA is not a security, and we therefore disagree with the action by the New Jersey Bureau of Securities.”
Some people feel that is strange as they are unable to understand how an interest-bearing account could violate securties laws. BlockFi’s BIA is a popular product that offers interest rates between 0.25% and 8.5% depending on the crypto asset and deposit size.
The move by the New Jersey Bureau of Securities came less than a month after BlockFi announced its BIA product would support UNI, the governance token tied to the popular DEX Uniswap. But the regulatory authority didn’t mention which assets offered in BIA constitutes securities. US SEC and CFTC categorize Bitcoin (BTC) and Ethereum (ETH) as commodities, but other popular DeFi assets have no regulatory clarity.
However, BlockFi BIA product is not free of complaints. There is a lot of discussion has been going on about BlockFi’s Terms of Service. A Reddit post outlines some of the controversial points of BlockFi TOS that stated that the firm is not responsible for any loss of funds resulted from cyber-attacks, or technical difficulties.
Replying to Zac, a crypto-news focused account Mr. Whale shared its previous tweet that called BlockFi a ponzi scheme a long ago. That tweet, posted in March, citing BlockFi TOS, said that BlockFi would fake a hack in the future and get away with millions.
BlockFi is a Ponzi Scheme. If you're reading this, you still have time to get out. I've been warning people for months, and it's all slowly happening before our eyes.
(Zac will block me after he reads this tweet)https://t.co/BX1ZE5GP9J
— Mr. Whale (@CryptoWhale) July 20, 2021
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