BlockFi faces regulatory backlash from multiple states but has plans to go public in a year

Popular cryptocurrency platform BlockFi is facing trouble from three states in the United States, including New Jersey, Alabama and Texas. The regulators have stated that the platform’s main product may be violating securities laws.

Three states believe BlockFi violated securities laws

BlockFi’s platform allows its users to deposit cryptocurrency holdings while earning interest depending on the type and amount of assets deposited. 

Earlier this week, the state of New Jersey banned the crypto platform from selling “unregistered securities” through its BlockFi Interest Accounts (BIAs) by way of a cease-and-desist order. The state further explained that the product violated the state’s securities legislation. 

Coincidentally, BlockFi is headquartered in New Jersey, and the CEO of the crypto firm said that the financial regulator gave the company an extension until late July for the ban to be in effect.

The state of Alabama followed New Jersey’s steps in warning that BlockFi was illicitly selling securities to fund crypto lending the following day. 

The day after, Texas also followed suit while also scheduling a hearing in October to finalize whether it would issue the same cease-and-desist order against the digital asset firm. Regulators from Texas further added that it had notified BlockFi in April that it could be violating securities laws. 

The latest filing by the Texas State Securities Board (TSSB) against the crypto firm gives BlockFi time an opportunity to make a response to the allegations. The firm would be allowed to continue to operate until the hearing takes place on October 13. 

According to the TSSB, the New Jersey-based firm has at least 25,000 customers in the state with over $691 million in total assets. BlockFi responded to the allegations and stated that interest accounts do not classify as securities. 

BlockFi targets public offering

Despite BlockFi’s legal woes, the crypto firm plans to go public in a year, according to documents sent out to investors. 

The New Jersey-headquartered firm will close its Series E funding round later this month. According to CoinDesk, documents suggest that BlockFi could be expecting a $4.75 billion post-money valuation. 

Over the past year, BlockFi has increased the number of assets on its platform to $15 billion, up from $1 billion from March last year. Its revenue has risen to over $50 million, up from $1.5 million a year ago. 

The crypto firm previously said it has plans to go public in the second half of 2021 through a special purpose acquisition company (SPAC). However, this could be delayed as BlockFi continues to face regulatory hurdles.

BlockFi could be following in the footsteps of another major crypto company, Coinbase, which went public in April of this year, marking a watershed moment for the digital asset industry.

Stablecoin firm Circle also announced plans of going public through a SPAC merger as well with a $4.5 billion valuation.