The New Jersey’s Acting Attorney General obtained a Summary Cease-and-Desist court order
against BlockFi, a crypto lending platform, to halt its Interest Account operations in the U.S. for violation of the securities law of New Jersey.
As alleged by the NJ Acting Attorney General, BlockFi, Inc. through its affiliate BlockFi Lending, LLC has been funding its lending operations at least in part through the sale of unregistered securities to the public. BlockFi offered investors an opportunity to deposit certain eligible cryptocurrencies into their Interest Accounts at BlockFi. The deposited funds were then used by BlockFi for lending and proprietary trading. In exchange, investors were promised a monthly interest.
The Interest Accounts offered by BlockFi constitute securities under the NJ securities law. However, BlockFi failed to register it with the NJ Bureau of Securities or any other securities regulator.
The main challenge for the DeFi projects is the same as for the companies that are selling tokens. Although, there may be no specific or explicit reference to the crypto- and decentralized finance products in the regulations yet, the existing law applies, nonetheless. Especially, when it comes to securities law.