> 22. BlockFi made a material misrepresentation to BIA investors concerning the level of
risk in its loan portfolio. Beginning at the time of the BIA launch on March 4, 2019 and
continuing to August 31, 2021, BlockFi made a statement in multiple website posts that its
institutional loans were “typically” over-collateralized, when in fact, most institutional loans were
not. When BlockFi began offering the BIA investment, it intended to require over-collateralization
on a majority of its loans to institutional investors, but it quickly became apparent that large
institutional investors were frequently not willing to post large amounts of collateral to secure their
loans. Approximately 24% of institutional crypto asset loans made in 2019 were overcollateralized; in 2020 approximately 16% were over-collateralized; and in 2021 (through June 30,
2021) approximately 17% were over-collateralized. As a result, BlockFi’s statement materially
overstated the degree to which it secured protection from defaults by institutional borrowers
through collateral. Through operational oversight, BlockFi’s personnel failed to take steps to
update the website statement to accurately reflect the fact that most institutional loans were not
over-collateralized
https://www.sec.gov/litigation/admin/2022/33-11029.pdf