The US state of Alabama has filed a Show Cause Order against the cryptocurrency lending company BlockFi for selling securities costing nearly $15Billion, that are not registered on the network.
According to reports, the Director of the securities commission, Mr. Joseph Borg, filed a Show Cause Order against BlockFi back in Wednesday, mentioning that BlockFi has broken several laws regarding securities. BlockFi has been accused of trading unregistered products into the market and has accumulated nearly $15Billion in value. According to the show cause order, BlockFi must justify and make things clear on their true intentions within the next month in order to continue operations in the state of Alabama and face other punishments from the authorities for performing illegal operations.
Adding to that, it states that BlockFi has allegedly been selling products like Interest Accounts, which violates certain laws and highlights securities being unregistered. BlockFi’s Interest Accounts are one of the main offerings provided by the firm, which allows clients to obtain interests if they deposit cryptocurrency by dispatching them off to the platform, which is centralized. Joseph Borg also said that the unregistered products that BlockFi is offering show a great deal of risk to users and investors, so it is important to keep things in check. Borg added that if we compare this to traditional Banking, any potential losses faced by investors are not able to be insured by corporations like the Federal Deposit Insurance Corporations.
In response to the allegations, BlockFi has been against all of the claims, clearly mentioning on their official Twitter account that the products they are offering are legal and accepted in the crypto space. The state of Alabama is the second one that has accused BlockFi of offering and selling illegal products. This Monday, the state of New Jersey also performed a similar action against BlockFi, sending them warning letters to stop any operations being run in the state.
The allegations have definitely highlighted BlockFi in the market, which might hinder the performance of the firm, decreasing BlockFi’s potential in the market. BlockFi is being supported by many major funds, having nearly $5 Billion in total value, meaning that BlockFi definitely has some strong backing, which will not be easy to stop.