Acting Attorney General Andrew J. Bruck today announced that the New Jersey Bureau of Securities has issued a Summary Cease and Desist Order to stop BlockFi, Inc from selling unregistered securities in the form of interest-earning cryptocurrency accounts that have raised at least $14.7 billion worldwide.

BlockFi, Inc, through its affiliates BlockFi Lending, LLC and BlockFi Trading, LLC, has been funding its cryptocurrency lending operations and proprietary trading at least in part through the sale of unregistered securities in violation of the Securities Law, according to the Order the Bureau issued yesterday.

The Bureau’s action comes amid rising concerns over the proliferation of decentralized finance platforms like BlockFi that seek to reinvent traditional financial systems such as banks and brokerages for digital asset investors. Unlike traditional, regulated banks and brokerage firms, however, investors’ losses are not insured against or protected by the Federal Deposit Insurance Corporation or Securities Investor Protection Corporation.

Further, these decentralized finance platforms, which are not currently registered or licensed, present a heightened risk of loss to investors.

BlockFi allows investors to purchase a BlockFi Interest Account by depositing certain eligible cryptocurrencies – including Bitcoin and Ethereum – into accounts at BlockFi. BlockFi then pools these cryptocurrency deposits together to fund its cryptocurrency lending operations and proprietary trading. In exchange for investing in the BlockFi Interest Accounts, investors are promised an attractive interest rate that is paid monthly in cryptocurrency.

The Order’s findings include that, despite advertising on its website that BlockFi is a ‘US regulated’ entity that ‘play(s) by the rules,’ BlockFi fails to disclose to investors that its BlockFi Interest Accounts are not registered with the Bureau or any other securities regulator, or exempt from registration.

The BlockFi website contains a “Disclosure and Complaints” page that advises dissatisfied investors to contact BlockFi’s Customer Service online before contacting their local jurisdiction to file a complaint. It then provides a list of state banking regulators and their contact information.

However, as stated in the Order, BlockFi fails to explain that state banking regulators such as the New Jersey Department of Banking and Insurance do not license the BlockFi Interest Accounts, or that complaints should instead be filed with the New Jersey Bureau of Securities because the BlockFi Interest Accounts are securities.

BlockFi already does not offer its interest-bearing accounts to residents of New York and certain other jurisdictions, presumably because of the laws in those jurisdictions.