Texas claims that BlockFi offers unregistered securities

The Texas State Securities Commission has filed a cease and desist order against crypto lender BlockFi for failing to offer state or federal licensed securities.

According to the filing filed on Thursday, the state regulator will hold a hearing on allegations that BlockFi illegally funded cryptocurrency lending and proprietary trading through the sale of securities. If the judge recognizes that the platform’s accounts earning interest in cryptocurrencies are unlicensed securities, BlockFi may be subject to an injunction.

If the judge orders it at a virtual hearing on October 13th, BlockFi and its affiliates BlockFi Lending and BlockFi Trading will likely be forced to stop offering BlockFi interest accounts in the state without checking with the local regulator or the US To register with the stock exchange supervisory authority. The filing claims that BlockFi was managing more than $ 691 million in assets from approximately 25,000 residents of Texas as of June 9.

Related: Texas wants to protect privacy elements of blockchain companies, Blockcap says

The enforcement department of the Texas State Securities Commission informed BlockFi on April 20 that BlockFi may not have complied with the state’s securities law with its interest accounts. Today’s filing alleges that the BlockFi interest account violated Section 4A of the Securities Act, as follows:

“The mere fact that an investment is tied to cryptocurrencies, blockchain technology or some type of digital asset does not release them from securities regulation when it comes to an investment contract,” the note said. , Proof of debt or some other type of security.

BlockFi has faced cease and desist orders from the New Jersey Securities Bureau preventing it from reaching customers with new interest accounts. Today, the Alabama Securities Commission also issued a 28-day order on the platform to show why it is not subject to the same regulatory penalties for allegedly selling unregistered securities in Alabama. Has credit platform to explain The BlockFI interest account is not a security.

Connected: Texas Regulator allows state-chartered banks to hold Bitcoin

With the exception of BlockFi, Texas is generally a welcoming state for crypto and blockchain businesses. Governor Greg Abbott has spoken openly about his support for local laws regarding cryptocurrencies and blockchain, with lawmakers passing a bill in June to recognize cryptocurrencies under commercial law in the U.S. state.

In addition, the state is already home to several large cryptocurrency miners, including Riot Blockchain, Argo Blockchain, and Blockcap. Cointelegraph reported last month that miners displaced by regulatory raids in China might look to Texas because of the state’s cheap electricity bills.