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PayPal Co-Founder Peter Thiel Injects $30 Million into Crypto Firm BlockFi to Improve Cash Flow and Expand Product Lines

Venture capitalist and PayPal co-founder Peter Thiel is backing New York-based BlockFi in a new funding round of $30 million.

The series B offering was led by Valar Ventures, which is a venture capital company backed by PayPal co-founder Peter Theil. Other investors in the offering round included Winklevoss Capital, Avon Ventures, Morgan Creek Digital, CMT Digital, PJC, and Akuna Capital. New investors included Purple Arch Ventures, Arrington XRP Capital, Kenetic Capital, HashKey Capital, and Castle Island Ventures.

BlockFi CEO Zac Prince said, “We decided to raise the Series B offering to expand our balance sheet and give ourselves the capacity to invest in things we want to do this year.”

Product diversification

BlockFi plans to use the $30 million in new funding to expand its staff team and develop new products.

Prince revealed that having HashKey as a Hong Kong-based investor will assist BlockFi in expanding into Singapore later this year. While BlockFi has been serving consumers in the region, this would be its initial physical presence there. Prince stated that BlockFi aims to attract lots of institutional customers in the Asia Pacific region, given that the number of asset managers, mining companies, and exchange and market maker exist there. The company also intends to attract more retail customers in the region as it translates its products and site into local Asian languages.

Prince stated that the firm intends to diversify its products further beyond the crypto lending sector. He mentioned, “We’ll be more and more be recognized as a diversified financial services entity and less and less associated with the crypto lending category.”

For instance, BlockFi aims to issue reward cards and credit cards that make it easier for consumers to receive crypto rewards or spend cryptocurrency when making purchases.

BlockFi intends to introduce a mobile app and the capacity to withdraw and deposit fiat wire transfers in the first quarter of this year. The company wants to provide an automated clearing house (ACH) payments in the second quarter of this year.

The company reports having over $650 million as crypto assets on its platform, a 160% rise from the $250 million in assets it reported in 2019 August, with a zero percent loan loss rate. In January 2020, the firm announced a slight decrease in yield for customers lending Ether and Bitcoin, caused by a more bullish crypto market.

Since last year, BlockFi offers crypto-backed loans, trading products, and interest accounts. The firm has recently begun to make a push into crypto trading, thus allowing users to swap between different kinds of crypto assets. The company is best known for its crypto lending services – the firm lets users leverage their crypto as collateral for a fiat currency loan or deposit their cryptocurrency in “crypto saving accounts” products that let users earn interests on their Ethereum, Bitcoin, and other cryptocurrencies. But critics claim that such offerings carry huge risks with no or little regulatory conditions on the crypto industry.

However, the company is seeing significant growth. Prince mentioned that the firm’s revenue increased by 20-fold since January last year.

Image via New York Magazine

Jul 10 Trading Analysis: When bitcoin sneezes, the crypto world catches a cold

Trading Crypto with Eugene is a series of daily commentary of market analysis and trading advice shared by Eugene Ng of Matrixport, a veteran trader with 10 years of experience in top-tier global investment banks. If you like the article, please follow us here on Blockchain.News so you won’t miss our future publications.

When bitcoin sneezes, the crypto world catches a cold. BTC’s down 2% in the past 24 hours dragging the entire sector into the red, with recent ALT tokens starting to retrace their stellar gains. Last night, we had some liquidations going through ~$20mil on BitMex from the sell-off in US stocks, driven primarily by large cap stocks. Interestingly, there’s some divergences going on between stock indices performance; while the Nasdaq gained 0.5%, Dow fell 1.4% and small cap Russell 2000 dropped 2%. Robinhooders giving up?

In terms of crypto headlines, Coinbase and BlockFI rumoured to be targeting for listing their shares publicly this year and 2021 respectively. Bitfiniex will have to respond to claims about hiding $850mil in NY court. Macro headlines today include Tokyo reporting record 240 Covid-19 cases on Friday (2nd waves hitting Asia? HK, Aus.. and now TKY), China state funds starting to sell (think this was strategic from the govt; signal that they do not want this rally to end in tears for retail) and escalating China-US tech war headlines (Tiktok in the mix). With escalating covid19 cases in some US states (esp Florida, Texas, California and etc – it’s very hard to ignore that when the cases keep rising), Oil now back to below $40, lack of any macro news tonight and some technical exhaustion signs on equity indices, I think US stocks will trade weak tonight; and I think there is a likelihood that S&P will likely close near the BIG 3k level. BTC has seen a 31% MoM drop in trading volume last month, and the trend’s been similar so far this month, and that has basically stuffed volatility up. I think with this potential crumble in equities tonight, BTC will see a BIG move tonight. A big $500-1k move. My plan is to basically to sit short and load up on 8 to 8.5k puts for the next few days. Gdluck and have a great weekend. BTC is respecting the downtrend channel for now… Dont fight the trend, the trend is always your friend…

Russell closing below channel tonight? That’s gonna be very telling for what may happen next in U.S. stocks… Will we continue to see the divergence b/w large cap and small cap again? Hmm..

China CSI 300 showing ALL TIME GREED. Time to book your profits, as my mentor once said once to me, it’s never your money until you take ’em.

Disclaimer
Opinions expressed are solely the analyst’s own and do not express the views of Matrixport the company.
The views and opinions expressed in this article are those of the contributor and do not necessarily reflect the view of Blockchain.News.

Former US CFTC Chairman Christopher Giancarlo Quits BlockFi’s Board of Directors

Former Commodity Futures Trading Commission (CFTC) chairman Christopher Giancarlo, also popularly known as “Crypto Dad,” has reassigned from crypto lending firm BlockFi’s board of directors after taking the job four months ago.

BlockFi has announced a press release stating that Giancarlo has been replaced by Ellen-Blair Chube, a managing director at investment banking firm William Blair & Company. While news reporters have tried reaching out to Giancarlo to shed more light on his decision, Giancarlo declined to respond to such requests for comment.

Zac Prince, the founder and CEO at BlockFi, talked about the development and said that Giancarlo would advise the group on digital assets in an informal capacity.

Meanwhile, Prince described Chube as having “strong financial services experience married with her deep knowledge of the public sector” in bringing her expertise to the group as a board member.

Giancarlo’s unexpected leave comes at a critical moment for BlockFi. In July, multiple states, in the United States, including New Jersey, Texas and Alabama, claimed that the firm is illegally funding its proprietary trading and cryptocurrency lending operations through the sale of unregistered securities. However, the firm has repeatedly stated that its BlockFi Interest Account is not a security.

BlockFi is fighting to resolve legal matters, enacted from multiple US states alleging that the firm’s flagship BlockFi Interest accounts (BIA) were unregistered securities. The legal issues have put BlockFi into crisis mode just as it is planning to go public after a potential $500 million Series E funding round, a deal that would bring the firm a total valuation of almost $5 billion.

The crypto lending firm is planning for a stock market debut that BlockFi’s Series E investors were informed could happen as soon as 2022.

It is unclear why Giancarlo leaves BlockFi’s board after being in the position for only four months. When he joined BlockFi in April 2021, he hinted at helping the firm bridge the gap between digital assets and traditional finance.

Giancarlo As the Contemporary Archetype

Giancarlo previously worked as the chairman of the CFTC for five years before leaving in April 2019. He left his mark on the CFTC as an advocate of modernized and digitalized regulatory processes, established LabCFTC as the derivatives-oversight agency’s focal point for regtech and fintech innovation, and became known as “Crypto Dad” for his interest in and openness to digital-asset products and blockchain technology.

In January 2020, Giancarlo co-founded the “Digital Dollar Project”, which seeks to encourage a US central bank digital currency development and discussions.

In March 2021, Giancarlo took a stake in crypto-asset and blockchain investment firm BlockTower Capital. In April this year, Post-trade and blockchain technology provider Baton Systems appointed him as a senior advisor, a role that the “Crypto Dad” continues performing to support the company’s post-trade payments and settlements growth strategy.

BlockFi, Neuberger Berman Partner to Offer Crypto Asset Product Suite, Including ETFs

Crypto lending company BlockFi has partnered with New York-based private investment management firm Neuberger Berman to create a new business entity that would develop and offer a new cryptocurrency management product, including Exchange-Traded Funds.

BlockFi announced on Monday, October 25, that the new joint business entity called ‘BlockFi nb’ expects to “launch crypto asset management products, including ETFs and other traditional structures,” that would give investors exposure to cryptocurrencies in their brokerage accounts.

BlockFi nb president, Greg Collett, talked about the development and said: “We are witnessing a significant shift in investor sentiment towards digital assets, and we believe that digital assets should be considered in modern portfolios.”

Through the launch of BlockFi nb, clients will have an asset management product suite that offers access to digital assets and services from experts in investment management and cryptocurrency, Collett said.

According to the two companies, the partnership will combine Neuberger Berman’s suite of crypto strategies with BlockFi’s retail and institutional cryptocurrency solutions. In other words, the product suite would include ETFs and other traditional structures. The crypto products will exist alongside BlockFi’s retail and institutional crypto solutions and Neuberger Berman’s actively managed crypto strategies suite.

Collett further stated that “we think this combination will help us to improve on products currently in the market so that we can give investors cost-effective and convenient access to the performance of digital assets from their brokerage accounts.”

BlockFi offers financial services such as interest-earning accounts and USD loans secured with cryptocurrencies for businesses and individuals across the US and worldwide.

Meanwhile, Neuberger Berman is an 82-year-old private investment management firm that manages $437 billion in client assets as of September 30. The company operates a range of fixed income, equity, hedge fund, and private equity strategies on behalf of individual investors, institutions, and advisors worldwide.

Crypto ETFs Demand Rising

The new partnership by BlockFi and Neuberger Berman comes at a time when cryptocurrency ETFs continue to gain popularity.

As reported by Blockchain.News, the first US Bitcoin ETF began trading on Tuesday, October 19, making the most widely traded cryptocurrency available to most investors with a brokerage account.

ProShares launched its Bitcoin futures exchange-traded fund last week, allowing investors to purchase and sell the assets outside of cryptocurrency exchanges.

Last week marked a milestone for cryptocurrency as investors began trading the ProShares Bitcoin futures ETF, exceeding any other ETF launches, and another, the Valkyrie Bitcoin strategy ETF, started trading on Friday on the public stock exchange market.

With ProShares and Valkyrie already trading their Bitcoin futures ETFs, others are expected to follow as the US Securities and Exchange Commission (SEC) considers other applications.

On October 8, BlockFi applied with the SEC to provide the BlockFi strategy ETF, an actively managed fund that would invest in Bitcoin futures contracts.

In August, Neuberger Berman began providing clients exposure to Bitcoin and other crypto-assets through crypto derivatives like Bitcoin futures and Ether futures, as well as investments in Bitcoin trusts and ETFs to gain indirect exposure to Bitcoin.

BlockFi Files for Spot Bitcoin ETF in the U.S.

BlockFi, a United States-based cryptocurrency lending platform, has filed for a spot Bitcoin Exchange Traded Fund (ETF) product with the Securities and Exchange Commission (SEC).

Per the filing, the BlockFi NB Bitcoin ETF will track the actual price of Bitcoin, different from the crop of new ETF filings billed to track the price actions of Bitcoin futures.

Despite the uncertainty surrounding Bitcoin regarding the approval of an actual spot ETF in the United States, service providers have refused to cave in. The approval of ProShares’ Bitcoin Strategy ETF in the past month and the float of Valkyrie’s Bitcoin Strategy ETF, both of which are futures-based, have sent a broad positivity across the industry.

At present, as many as 21 spot Bitcoin ETF applications are on the horizon for the Securities and Exchange Commission to approve. These number does not account for the broad count of rejections in the previous years. Amongst the companies with rejections includes Bitwise, which has also submitted a new filing, noting it has done its due diligence, taking time to address the core concerns the market regulator pointed at.

There have been speculations that the SEC might have come to the end of its rejections concerning spot BTC ETF applications. The SEC has neared its end per its decision on VanEck Bitcoin Trust, which was filed back in December 2020. With no room for further delays, the regulator is bound to either approve the application or reject it. Most market proponents are expecting a softer landing seeing the favourable disposition of the regulator to the ETF market today.

Investors have continued to explore all available avenues to gain exposure to digital currencies through the shares of publicly-traded companies in the space, direct crypto purchases on spot markets, and now through the approved Bitcoin futures ETF. With the potentials of spot-based ETFs, investors are likely to continue demanding related products.

BlockFi Faces SEC Probe Over High-Yield Crypto Accounts Offerings

The US Securities and Exchange Commission is probing BlockFi cryptocurrency lending platform over its high-yield, interest-bearing accounts. Earlier this year, a series of state-level agencies had launched investigations into BlockFi.

BlockFi, a New Jersey-based company has grown in popularity with such product offerings. The firm lets users lend and borrow a wide range of cryptocurrencies such as bitcoin, ethereum as well as stable coins like tether and USD Coin.

The rate of return on the dollar-pegged cryptocurrencies is significantly much higher than those of banks.

According to its website, BlockFi provides accounts that allow users to earn annual yields as high as 9.5%. In contrast, traditional savings accounts allow holders to earn a mere 0.06% annually. While digital-asset savings accounts offer higher interest rates, they are not insured by the federal government, unlike bank deposits.

Sources who requested their identities to remain anonymous told Bloomberg media outlets that the SEC’s probe is majorly focused on the need to determine whether such interest-earning accounts called “BlockFi interest accounts (BIAs) are securities. If so, these products must then be registered with the agency.

So far, the SEC has not accused BlockFi of any wrongdoing, but BlockFi has maintained that its product is not a security.

BlockFi currently has more than 500,000 retail accounts and its value currently stands at over $4 billion. The firm has been backed by investors like Tiger Global Management and Bain Capital since its establishment in 2017.

Warning Shot at Cryptocurrency Lenders

The latest development is not the first time when BlockFi clashed with authorities. Several US states have cracked down on the crypto lending platform for potentially violating securities laws with its high-end accounts.

As reported by Blockchain.News, US states of Texas, Alabama, and New Jersey in July announced that the platform did not register its BlockFi Interest Accounts (BIAs) with state regulators and that they may be unregistered securities offerings. Other states such as Kentucky and Vermont also raised similar concerns regarding BlockFi products over the previous several months.

In September, the SEC embarked on a move that seems to shake the whole crypto lending industry. The agency warned Coinbase Global not to pursue its proposed crypto lending product called Coinbase Lend.

Coinbase had plans to introduce its own decentralized finance (DeFi) lending products during the last few weeks. If it had been introduced, the product would have allowed investors to earn interest on their crypto holdings by making them available to borrowers.

While several of Coinbase’s competitors already have similar interest-earning lending products, SEC threatened to sue Coinbase if the popular exchange goes ahead and launches its crypto lending program. The security agency considered the product as security and later Coinbase abandoned its lending program.

Celsius, a cryptocurrency lending firm that offers interest in crypto holdings, has also been facing similar regulatory security in several states that have cracked down on BlockFi.

The SEC under Gary Gensler’s leadership has turned its focus on the rapidly growing decentralized finance (DeFi) space. Many decentralized projects such as Compound and Aave provide yield-bearing products similar to Celsius and BlockFi services.

In August, the SEC boss suggested that the decentralized finance space could be in the business of selling unregistered securities and therefore called for tougher regulations on the sector.

Image source: https://africa.businessinsider.com/markets/sec-probes-blockfi-as-regulator-mounts-investigations-across-dozens-of-crypto-firms/5hlp7m3

BlockFi to Pay $100M in Settlement to US SEC

BlockFi, an American crypto lending platform, reportedly agreed to a settlement deal with the United States Securities and Exchange Commission (SEC).

The settlement as reported by Bloomberg citing people familiar with the ongoing negotiations will see the company pay $50 million to the SEC, and another $50 million to a number of states that are also probing the company.

The BlockFi-SEC case centres on the allegations that the company is offering investors a high earning interest rate on their deposits, a product that takes the form of security but which was not registered. BlockFi offers a lender’s interest rate that can be as high as 10% noting that institutional investors borrow these funds and pay a lot of interest which it uses to repay borrowers.

Per the Bloomberg report, the sanctions can be announced as early as this week and it will come off as one of the biggest crackdowns on a US-based digital currency platform.

“We have been in productive ongoing dialogue with regulators at the federal and state level. We do not comment on market rumours,” said BlockFi spokesperson Madelyn McHugh. “We can confirm that clients’ assets are safeguarded on the BlockFi platform and BlockFi Interest Account clients will continue to earn crypto interest as they always have.”

While the BlockFi probe has been ongoing for a while, it will be one of the most prominent platforms to experience the wrath of the regulators in recent times, it is generally not uncommon to find exchanges get in the cross-hairs with trading platforms. The SEC personally warned Coinbase exchange, the largest trading platform in North America to watch its plans to offer a lending product, saying it will sue the company which went public last year if it proceeded with the plans.

Beyond Coinbase, other native American trading firms including Gemini, Celcius, and Voyager Digital are also on the SEC’s watchlist regarding their potential product offerings.

BlockFi to Pay $100M to Settle Charges with SEC & 32 States

BlockFi will pay $100 million to the U.S. Securities and Exchange Commission (SEC) and 32 states to settle charges in connection with a retail crypto lending product.

The charges have come after a subsidiary of BlockFi offered the retail crypto lending product to nearly 600,000 investors, regulators said.

The penalty is the largest fine the federal watchdog has levied on an issuer of crypto-asset securities, and it includes $50 million for state regulators and $50 million to the SEC.

The SEC added that the charges are lower than they might have been due to BlockFi’s willingness to cooperate.

BlockFi Lending LLC is paying the heavy fine as it broke the rules by offering an interest-bearing lending product without registering it with regulators.

The company and its affiliates held about $10.4 billion in assets from investors – nearly 400,000 in the United States – as of Dec 8, the SEC said.

According to Reuters, the charges come as U.S. regulators, worried about investor protections and systemic risks, are cracking down on the booming crypto industry.

Also, the settlement is an example of SEC chair Gary Gensler’s strategy to force crypto firms to comply with existing U.S. securities laws, Reuters added.

The agency said it hopes more companies will follow suit.

BlockFi was also alleged by the North American Securities Administrators Association (NASAA), which coordinated the multi-state probe, of failing to comply with similar state registration rules. The NASAA said that more jurisdictions are expected to join the settlement.

In reply to the settlements, BlockFi said the resolution is an example of the firm’s “pioneering efforts in securing regulatory clarity for the broader industry and our clients.”

Following the case, BlockFi has planned to offer an alternative product expected to be the first crypto interest-bearing security registered with the SEC.

In recent years, the SEC has been keeping a closer look at crypto exchanges and lenders as the agency is working on bringing the digital asset sector within the existing regulatory framework.

According to Reuters, crypto lending products, in particular, have become an SEC target. In September, Coinbase Global Inc said the agency was threatening to sue if it went ahead with plans to offer a similar product.

Nearly a third of Women Plan to Buy Crypto in 2022, Says BlockFi

Crypto financial services firm BlockFi has released the third edition of its Real Talk quarterly survey.

According to the BlockFi survey, nearly one-third of women surveyed plan to buy cryptocurrencies in 2022, and 60% of respondents plan to purchase cryptocurrencies within the next three months.

Although 2022 has seen wild swings in the cryptocurrency market at the beginning of 2022, investor interest in cryptocurrencies has been rekindled due to the recent wars between Russia and Ukraine.

The cryptocurrency market capitalization has back at $2 trillion. The confidence of female investors in investing in cryptocurrencies for the long term remains undiminished.

The report noted that 24% of women reported owning cryptocurrencies. Bitcoin (71%), Dogecoin (42%) and Ethereum (18%) are the top three cryptocurrencies with the highest investment among female investors,

And nearly 45% of women say they know how to buy cryptocurrencies.

While 72% believe investing in cryptocurrencies is a high risk, one-third of women surveyed said they plan to buy cryptocurrencies this year.

Flori Marquez, Founder and SVP of Operations at BlockFi, said that:

“It’s very exciting to know that women are becoming more aware of the benefits of owning crypto and expressing interest in working in the crypto sector. Now it’s our responsibility to continue to close the education gap and provide as many on-ramps as possible, so women can easily gain exposure to crypto markets and get comfortable doing more with their crypto.”

One in five women surveyed believed that cryptocurrencies could help them achieve financial goals large and small, finance vacations, buy a home, and more.

Not just focusing on the fast trading field with cryptocurrencies, 10% of the women surveyed also expressed that the crypto industry is the most promising career field.

BlockFi Records Data Breach on Hubspot of its Third-Party Vendor

BlockFi, an American cryptocurrency platform to buy, sell and earn crypto, has confirmed that some of its client’s data stored on Hubspot, a Customer Relationship Management platform, have been compromised.

Confirming the incident on Twitter, BlockFi said the compromised data were limited to name, email addresses, and phone numbers.

BlockFi said it proactively informs its affected clients of the incident, which is suspected of being tilted toward a phishing attack before the bad actors attempt to utilize the stolen data. The investigation regarding the hack is still ongoing. The platform confirmed that it does not store the most sensitive data, including BlockFi’s account and its passwords, information of government-issued ID cards, and social security numbers on Hubspot; hence these are safe.

In a bid to allay all fears, BlockFi confirmed that no user’s funds were stolen as the breach remains only with Hubspot. The platform advised its users to beware of emails sent with a demand in urgency to change passwords and the likes. The company asked its users to implement additional safeguards to improve their accounts’ security.

As part of the recommendations BlockFi gave is the activation of Two-Factor Authenticator (2FA), the permission of the platform’s ‘Allowlisting’ feature places withdrawal on at least a 7-day hold should a new address be listed for withdrawal. The platform said this can significantly protect its clients from being exploited by bad actors.

In whatever format they come, hacking or protocol breaches are not uncommon in the digital currency ecosystem, especially amongst cryptocurrency exchanges and Decentralized Finance (DeFi) platforms. Earlier this year, Singapore-based Crypto.com suffered the first major crypto exchange breach for the year as far back as January. This incident impacted about 400 accounts with more than $34 million lost.

Per the BlockFi-Hubspot breach, the platform said continuous collaborations would be advanced, and affected clients would be updated about discoveries in the near term.