Wisconsin Department of Financial Institutions Joins with 31 Other State Securities Regulators and the U.S. Securities and Exchange Commission to Settle with Digital Asset Lending Platform BlockFi for $100 Million for Sales of Unregistered Securities
MADISON, Wis. – The Wisconsin Department of Financial Institutions (DFI) today announced that a digital-asset financial services company, BlockFi Lending LLC (BlockFi), agreed to settlement terms to work with the DFI to settle offers and sales of unregistered securities in the form of interest-bearing digital asset deposit accounts called BlockFi Interest Accounts (BIAs) to Wisconsin residents. As of December 31, 2021, BlockFi had 407,030 BIA investors in the U.S., of which more than 4,885 were Wisconsin residents.
BlockFi agreed to pay $50 million to the 53 North American Securities Administrators Association (NASAA) member agencies, of which DFI is a member, and $50 million to the U.S. Securities and Exchange Commission (SEC). The 53 NASAA member agencies will share equally in their half of the settlement, with each receiving $943,396.22 after executing the appropriate consent orders. The DFI is one of 32 NASAA member agencies that have already agreed to work with BlockFi to settle and more jurisdictions are expected to follow.
BlockFi’s agreement to enter into a settlement with the DFI comes amidst rising concerns over the proliferation of “decentralized” and digital asset-based financial products and services targeting retail investors. Many of these products and services are analogous to traditional financial services offered by banks and brokerages, but without any of the regulatory safeguards provided by registered firms and products. For example, registered firms must truthfully disclose all known material facts and explain the risks associated with their investments, while the Federal Deposit Insurance Corporation, National Credit Union Administration, and the Securities Investor Protection Corporation insure depositors and investors against certain kinds of losses. Financial service firms operating in innovative fintech markets may not be complying with important laws that protect retail clients, and investors may not have access to the information necessary to conduct due diligence and make fully informed decisions.
“State securities regulators recognize the value new technology brings to financial markets. Complying with existing laws and regulations promotes competitive capital markets and continued investor protection,” said DFI Secretary-designee Cheryll Olson-Collins. “This action by NASAA member agencies and the SEC sets an example for other firms providing digital asset financial products and services of how to work toward complying with state and federal law.”
Firms that need to register and deal with past unregistered activity should contact their state and federal regulators. The DFI’s Division of Securities can be contacted by phone at (608) 266-2139 or by email at DFISecurities@dfi.wisconsin.gov.
The DFI would like to thank its fellow NASAA member agencies, especially the multistate working group, for its coordinated efforts and the SEC for their collaboration and assistance.
NOTE: This press release was submitted to Urban Milwaukee and was not written by an Urban Milwaukee writer. While it is believed to be reliable, Urban Milwaukee does not guarantee its accuracy or completeness.
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Hello,
BlockFi.com locked my account with $25,000 inside, around 80 days ago, and they are not willing to process a refund. They are asking for a court order just for them to process a refund.
After seeing a bunch of info about the products BlockFi offers that seemed attractive at first glance, I decided to open an account. Within minutes the account was ready to take the money out from my bank. No photo identification required, by the way.
I started depositing money, and seemed easy compared to other services of this kind.
After a while, I thought it would be a good idea to secure some funds by processing two Crypto withdrawal requests.
I’ve been waiting for two days (the minimum waiting time offered for a Crypto withdrawal), but instead of processing my requests they asked me for verification via ID/Passport, photos/video using my phone..(a regular request of any CEX), but what’s strange, it’s that they will ask for Verification after they allow you to deposit large amounts of money, and not before, as any other service does. I wonder what would happen with your money in a strange scenario where (for some reason) you can’t successfully pass the Verification.
But… that was Ok. I successfully processed the verification within minutes.
Then, surprise….. Because I had two pending withdrawal requests for two different Crypto coins, even if one of them was for a very small amount being executed just for me to understand their withdrawal process, BlockFi asked me to get Verified once again. Not a different Verification process. Just the same one I had successfully executed minutes ago.
No problem! I did it again “You’re all set !”.
Within minutes, I got an email notifying that my BlockFi account was locked. No explanation other than asking to read their TOS, and the following notice….. “Should you be unable to retrieve funds through your bank, you must wait 60 days from receipt of this email before requesting a manual wire withdrawal to the source bank account. Please note that we may require identity verification to process the withdrawal. Note: Any requests made to BlockFi about your account funds will be ignored until we can process a return of funds which will only be eligible after 60 days. Do not reach out to BlockFi until after this date. ”
The 60 days have passed and even though I used every possible method to contact BlockFi, it doesn’t seem like anyone’s going to reply. (Several support tickets or by sending any kind of message using any possible form on their Help/Support pages, trying to call them using the phone number listed over their Help page, sending message via some of the previous support tickets that were used around two months ago to communicate with them..and more..
Let’s not forget that a considerable amount of money is still with BlockFi, and my account is still blocked.
If that can’t be called an extremely frustrating situation, I’m curious to hear another 🙂 .
——— UPDATE
Finally I’ve been contacted, being informed that they will return my money…soon.
This is definitely good news, but … I still find myself in a “strange” situation.
Let me explain: When BlockFi locked my account they said: “At this time, we are not able to return any funds to you directly. We’d recommend that you contact your bank and request that any ACH transfers you made to your BlockFi account be canceled and reversed. Should you be unable to retrieve funds through your bank, you must wait 60 days from receipt of this email before requesting a manual wire withdrawal to the source bank account. ”
I thought it would be faster to follow BlockFi’s advice by asking the bank to proceed as per their instructions,but a nightmare was about to start.
Shortly after asking the bank to return transfers made by me (no scam or hack involved), they decided that something is not right, ending by closing my bank accounts. PERMANENTLY.
So BlockFi will not be able to send a Wire Transfer as it will be automatically returned.
But when they blocked my account, part of the money was in Crypto balances. I wonder what are the terms used to close my positions. Crypto coins rates have changed in the past 70 days. Maybe they will process my original withdrawal requests via crypto? Or will they accept my request to send my money to another bank account in my name? Also I wonder how they could have sent a Wire Transfer to an account that does not accept wires (if they were sent to BlockFi from a NeoBank). Not the case here, but just wonder…
— UPDATE
BlockFi’s final word is: “Any funds on the account will remain locked until BlockFi receives a court order to refund the funds”
$25,000 of my money is locked and they also refuse a refund to the source bank account.
Also, I don’t know how legal it is for them to hold the money for an indefinite period of time without offering any refund option. Via their Terms page, a situation like this is not clearly specified. I cannot find information about what happens to a blocked account, or any information that specifies that there may be the possibility for a court order to get the money back. But it says clearly that to allow you to place trading positions on their platform, you need to be checked beforehand. Their only argument for keeping my money locked up is that they couldn’t verify me. As I said above I have been checked several times. And if they couldn’t verify me, how could I repeatedly deposit money and buy Cryptocurrency?????? It makes no sense, right?
By the way: Check on this (based on their Terms): “Please note that no technology can be considered completely secure or impenetrable and internet protocols and other public and/or proprietary technology used or accessed by the Online Platform may be vulnerable to exploitation or compromise by persons engaged in hacking or criminal conduct. Subject to applicable law, BlockFi shall have no liability to you for any such exploitation or criminal conduct by third parties” – That means they won’t take any responsibility if a hack occurs in their system. If a hacker manages to access BlockFi’s platform, forget about your money…