In the wake of Blockfi’s problems with the New Jersey Bureau of Securities, the company now has problems in the state of Alabama. Alabama Securities Commission (ASC) director Joseph Borg explained on July 21 that he had issued a rationale to the company. Borg wants Blockfi to explain why the ASC shouldn’t copy the New Jersey cease-and-desist because regulators in Alabama also appear to believe they might be selling unregistered securities. Blockfi received another order from the Texas State Securities (TSS) Board for the same reason.
Alabama Securities Commission show cause order calls Blockfi accounts in unregistered securities, Texas joins crackdown
- Alabama Securities Commission (ASC) director Joseph Borg told reporters on July 21 that Blockfi had received a formal show cause order. A show cause order is different from the stop and forbearance issued against Blockfi in New Jersey, because it gives the company an opportunity to explain whether the order is justified or not.
- A press release from ASC Director Joseph Borg points out that the show cause order requires Blockfi to explain “why it should not be ordered to cease and desist selling unregistered securities in Alabama.” .
- “There are thousands of entities registered with ASC, as required by law, to sell securities to residents of Alabama,” ASC director Borg said in the statement. hurry. “Most of the people registered to sell securities live outside of Alabama, but anyone offering securities must be registered before making an investment offer to an Alabama resident,” he added. .
- Blockfi responded to the allegations and the show cause order. “We are aware of the show cause order issued by the Alabama Securities Commission,” Blockfi’s official Twitter account details. “We have active dialogues with regulators around the world, including those in Alabama, to share details about our products, which we believe are legal and appropriate for crypto market participants.”
- “Our position has not changed – the Blockfi interest account is not a security,” the company added. stress.
- The two orders from Alabama and New Jersey appear to indicate that regulators believe the Blockfi interest-bearing accounts are unregistered securities offerings. Both states also stress that aggressive regulatory measures are aimed at protecting retail investors.
- As a result of Alabama’s show cause order, Texas became the third state to join the crackdown on Blockfi’s interest-bearing account (BIA) proceeds. The Texas State Securities (TSS) Board on Thursday released the order explaining that Blockfi’s product is not protected by the Securities Investor Protection Corporation (SIPC).
- “BIAs are not protected by the Securities Investor Protection Corporation, also known as SIPC, a US non-profit, member-funded corporation created under the Securities Investor Protection Act of 1970 which requires the membership of most brokers registered in the United States. -resellers ”, notes the TSS order.
- “The mere fact that an investment is tied to a cryptocurrency, blockchain technology, or type of digital asset does not remove it from securities regulations if it constitutes an investment contract, a note , proof of indebtedness or some other type of security, ”the TSS order adds. “Based on the information and allegations set forth herein, BIAs constitute investment contracts, notes or evidence of indebtedness regulated as securities within the meaning of Section 4.A of the Securities Act.
- The head of OTC options trading at Kraken, Juthica Chou, asked why securities regulators are so aggressive. “Have state securities regulators always been so aggressive or are they just finding such easy and opportunistic targets in Robinhood and Blockfi”, Chou tweeted.
- Blockfi also pointed out on July 19, after New Jersey’s cease and desist order, that a Blockfi Interest Account (BIA) is not a security. “BIA is not a stock, so we don’t agree with the New Jersey Bureau of Securities action,” the company said. noted at the time.
- “ASC’s action comes amid growing concerns about the proliferation of decentralized financial platforms like Blockfi that seek to reinvent traditional financial systems such as banks and brokerage houses for digital asset investors,” explains the CSA press release.
- “The Show Cause Order alleges that, despite advertising on its website that Blockfi is a” regulated entity in the United States, “Blockfi does not disclose to investors that its BIAs are not registered with the ASC or any other securities regulator, ”the ASC statement concludes.
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