$940,000 headed to Vermont in cryptocurrency settlement | Local News

MONTPELIER — Commissioner Michael Pieciak announced that a financial services company BlockFi Lending agreed to $100 million settlement terms with the Department of Financial Regulation, in a case relating to BlockFi’s sale of unregistered cryptocurrency interest-bearing accounts to Vermonters.

As of Dec. 31, BlockFi had gotten over 470 Vermonters to hold over $6.5 million in cryptocurrency assets with the company in its interest-bearing account products. BlockFi agreed to pay $50 million to state regulators (plus the District of Columbia, Puerto Rico and the U.S. Virgin Islands) and $50 million to the Securities and Exchange Commission. The state of Vermont will receive just over $940,000.

“This settlement reflects Department of Financial Regulation’s core mission to protect investors and ensure a level playing field for industry participants,” said Pieciak. “I am proud of the key role [it] played in bringing this matter to a resolution and I want to thank assistant general counsels Ethan McLaughlin and Erin Moore for their leadership and tireless efforts to protect investors in Vermont and nationwide.”

In 2019, the department’s Banking Division received an application for a license from BlockFi. While reviewing the application, attorneys raised questions as to whether BlockFi was selling unregistered securities. It brought the matter to a multistate working group and served as a lead state in pursuing a global resolution.

Beginning in January 2021, the multistate working group contacted BlockFi and provided notice that the company may have offered and sold securities not in compliance with state securities laws. During the summer of 2021, six states, including Vermont, filed actions against BlockFi. State regulators alleged BlockFi promoted its unregistered cryptocurrency interest-bearing account products with promises of high returns for investors. As a result of being unregistered, investors were deprived of critical information and disclosures necessary to understand the potential risks of these interest-bearing account products.

This settlement comes amidst growing interest in cryptocurrencies among Vermonters. In the early months of the pandemic, the number of cryptocurrency transactions initiated in Vermont skyrocketed over 400 percent percent (224,283 transactions in 2020, compared to 44,290 in 2019) with over 7,000 Vermonters partaking. The total value of those Vt.-based transactions topped out at $83.7 million in 2020, compared to $15.1 million in 2019.

Some cryptocurrency products don’t have any of the regulatory safeguards provided by registered firms and products. 

Effective immediately, BlockFi will stop offering its interest-bearing account products to the public as it works to get into securities compliance. BlockFi may continue to deploy digital assets for existing customers and may continue to pay interest. Further, current investors may keep their existing investments with BlockFi and will continue to earn interest under their initial agreements 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.

Vermonters who are concerned about whether their cryptocurrency investment or firm are properly registered should contact the DFR Securities Division at 802-828-3420 or via email dfr.securitiesinfo@vermont.gov.