Federal Authorities Demand BlockFi to Transfer Funds Used in $575M Scam

Federal Authorities Demand BlockFi to Transfer Funds Used in $575M Scam

BlockFi, a platform that lends cryptocurrency, has been directed by the court to transfer funds related to a $575 million fraud. The court-appointed prosecutor, who filed a complaint against BlockFi in March, issued the order. The prosecutor alleged that BlockFi’s platform was used to transfer and hide funds in the fraudulent scheme.

About the Accusations 

According to the accusation, individuals engaged in fraudulent activities utilized BlockFi’s platform to transfer a substantial amount of cryptocurrency worth millions of dollars. The converted funds were then transferred to various accounts worldwide in fiat currency. Additionally, the complaint alleges that BlockFi had knowledge or should have had knowledge of the fraudulent activities but did not take action to stop it.

Reportedly, two Estonian citizens are accused of perpetrating a scam through the use of shell companies to launder the earnings of their fraudulent activities and buy luxury goods. They have been charged with running a series of interconnected fraudulent schemes that involved cryptocurrency, including a Ponzi scheme disguised as a mining operation. It is claimed that the scheme defrauded investors out of an astonishing $575 million. The Estonian authorities arrested the suspects, and they are now facing charges in the United States.

BlockFi’s Response 

BlockFi has denied any wrongdoing and has taken legal action against the allegations. Despite this, a settlement was reached between the parties involved, and the court has ordered BlockFi to transfer the funds that were used in the fraudulent scheme. This transfer will facilitate the full payment to the US government and other victims of the scam.

BlockFi’s Legal Troubles

BlockFi has also faced legal troubles previously when it was accused of violating securities laws with its interest account offering. This resulted in a case with the US Securities and Exchange Commission (SEC) earlier this year. In order to resolve the matter, BlockFi had to pay a hefty fine of $100 million and cease the sale of its unregistered lending product.

BlockFi had also filed for Chapter 11 bankruptcy in May and announced plans to shut down its cryptocurrency lending platform. The company concluded that transferring ownership to another entity would not generate enough profits for its debt holders. BlockFi will present its restructuring proposal under Chapter 11 to its more than 100,000 customers who will be allowed to have a vote on the proposal.