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BlockFI faces trouble in Texas

The Texas State Securities Board (TSSB) has filed for a cease and desist order against BlockFI, BlockFI Trading, and BlockFI Lending. Currently, the order is not in effect since the judge hasn’t signed off the hearing till now. However, due to this, the company has an opportunity to respond to the allegations.

As of now, the company can continue operations until the hearing.

Texas regulators alleged that BlockFI’s interest account product is a security under state rules. And with the cease-and-desist order, BlockFI cannot offer its BIA product without registering it with the state’s securities regulator.

States like Alabama and New Jersey had earlier objected to BlockFI’s interest-bearing product. According to them, these products might violate state securities laws.

Texas regulators are arguing with the company on the factor that customers who place their cryptos in the lending platform’s control for investing may violate state securities laws.

In the filing, there was a clear indication about BIA products:

“The BIAs constitute investment contracts, notes, or evidences of indebtedness regulated as securities as that term is defined by Section 4.A of the Securities Act.”

The state had previously warmed BlockFi about its product. In late April, Texas stated that it notified BlockFI that its lending product might be violating state securities rules. Despite that, the lender continued to illegally offer BIA in Texas, according to the TSSB spokesperson.

TSSB has said that BlockFI currently has 25,000 clients in Texas with $691 million in total assets. However, the company in its response, said that its interest accounts aren’t securities.

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