The Kentucky Department of Financial Institutions has become the fifth state regulator to accuse BlockFi of breaking state securities laws with its interest service.
Kentucky’s Division of Securities has ordered the crypto lender to halt new account openings in the state. BlockFi Interest Accounts (BIAs) are being accused of violating state securities laws by Kentucky, New Jersey, Alabama, Vermont, and Texas.
“Blockfi’s website advertises ‘Blockfi Interest Accounts (BIAs),’ which are bitcoin lending and borrowing services. Investors can deposit particular cryptocurrencies with the company in exchange for a set interest rate through these accounts.’ According to the regulator, the business has received roughly $15 billion in these accounts from investors.
BlockFi responded by announcing that it will “immediately” stop accepting new users in Kentucky.
Existing clients will not be impacted. Kentucky has joined Texas in requesting a cease-and-desist order, while New Jersey, Alabama, and Vermont have requested “show-cause” orders.
Customers pool their funds with the company, which then lends them to make a profit, prompting accusations that BIAs are in violation of securities laws.
BlockFi, for one, has maintained that BIAs do not, in its opinion, violate securities laws in any of the states where it does business.
Many of the state agencies looking into BlockFi’s allegations have allowed the business to present proof to back up its claims. BlockFi has until the beginning of September to answer in New Jersey, while Texas securities authorities have set a hearing for early October.
According to documents, the business is still pursuing a $500 million Series E investment round ahead of a prospective public offering, despite its regulatory issues. The round was supposed to close earlier this week, but it’s unclear whether it did.