The Minnesota Department of Commerce has joined with 31 other state securities regulators and the US Securities and Exchange Commission (SEC) to settle with BlockFi for $100 million for sales of unregistered securities. The State of Minnesota will receive over $940,00 that will go to the state General Fund. 

BlockFi Lending LLC (BlockFi), a digital-asset financial services company founded in 2017, provides services to earn interest, borrow cash, and trade crypto, also called cryptocurrency. What is cryptocurrency? The North American Securities Administrators Association (NASAA) has a “Get in the Know” series of three animated videos about crypto:  

BlockFi has agreed to settlement terms to work with the Minnesota Department of Commerce to settle offers and sales of unregistered securities, a form of interest-bearing digital asset deposit accounts called BlockFi Interest Accounts (BIAs), to Minnesota residents. As of December 31, 2021, BlockFi had over 407,000 BIA investors in the U.S.  

The Minnesota Department of Commerce is one of 32 member agencies in NASAA that have already agreed to work with BlockFi to settle and more jurisdictions are expected to follow. BlockFi agreed to pay $50 million to the 53 NASAA member agencies and $50 million to the SEC.  

“While we recognize the value new technology brings to financial markets, the Minnesota Department of Commerce expects financial companies to comply with existing laws and regulations to promote competitive and fair capital markets, and to protect Minnesota consumers,” said Commerce Commissioner Grace Arnold. “This action by the Minnesota Department of Commerce, NASAA and the SEC, sets an example for other companies providing digital asset financial products and services of how to work toward complying with state and federal law.”   

BlockFi’s agreement to enter into a settlement with the Minnesota Department of Commerce comes at a time of rising concerns at the state and federal level over the proliferation of “decentralized” and digital asset-based financial products and services targeting retail investors, or consumers, such as cryptocurrency.  

Many of these products and services are similar 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 (FDIC), 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. 

Effective immediately, BlockFi will stop offering its BIAs to the public. BlockFi’s parent company, BlockFi Inc., represented it intends to file with state and federal regulators to offer and sell a new product called BlockFi Yield. As part of the settlement terms, BlockFi will cease allowing new investments in the BIAs until its securities are properly registered. BlockFi may continue to deploy digital assets for existing BIA investors and may continue to pay interest. Between February 14 and the date BlockFi Inc.’s securities are registered and qualified or permitted for sale with the states and SEC, current investors may keep their existing investments with BlockFi and will continue to earn interest under their initial agreement with the company. This measure is designed to protect the interests of existing investors while allowing BlockFi time to bring itself into compliance with state and federal law. 

The Minnesota Department of Commerce is continuing to consider enforcement actions against firms that fail to comply with state law. Firms that need to register and deal with past unregistered activity involving Minnesota consumers can /commerce/industries/securities/index.jspcontact Minnesota Department of Commerce Securities.  

Commerce is here to help 

Consumers with concerns or complaints can contact the Department of Commerce Consumer Services Center at consumer.protection@state.mn.us or by phone at 651-239-1600 or 800-657-3602.  

Commerce would like to thank our fellow NASAA member agencies, especially the working group for the multi-state coordinated efforts, and the SEC for their collaboration and assistance. 

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MEDIA CONTACT:  Mo Schriner, Communications Director Minnesota Department of Commerce mo.schriner@state.mn.us