SEC Imposes Fine On BlackRock As Bitcoin ETF Review Awaits

SEC Imposes Fine On BlackRock As Bitcoin ETF Review Awaits

On October 25th, there was a settlement between BlackRock and the US Securities and Exchange Commission (SEC), which saw the former pay a fine of $2.5 million.

The regulator had accused the Wall Street giant of not describing investments in the entertainment industry accurately.

The charges

These charges come at a time when the financial world is waiting for the SEC to complete its review of the application of a Bitcoin exchange-traded fund (ETF) filed by BlackRock.

Should the Bitcoin ETF get cleared for trading, it would become the first product of its kind to be available in the United States.

The biggest fund manager in the world, BlackRock did not accept or deny the allegations made by the SEC, which is considered customary in such situations, and just chose to settle.

To put it simply, the regulatory agency had alleged that the Multi-Sector Income Trust (BIT) of the company had invested in film company Aviron Group LLC from 2015 to 2019.

The Commission said that the asset manager had defined the film company as a ‘Diversified Financial Services’ company, which was untrue.


Andrew Dean, the co-chief of the Asset Management Unit of the Enforcement Division, said that companies offering mutual funds or closed-end portfolios should make accurate disclosure.

This can help institutional and retail investors in evaluating their existing or future investments in the fund.

He went on to say that it is the responsibility of investment advisers to provide this vital information, something that BlackRock had not done.

The announcement from the SEC also alleged that the asset manager had claimed that a higher interest rate was paid by Aviron, but that had not been the case.

According to the Commission, in 2019, the fund manager had identified these inaccuracies and in reports going forward, it had accurately reported the investment in Aviron.

The background

It should be noted that this is not the first time that the SEC has filed a lawsuit against BlackRock, as it had done the same back in 2015.

A $12 million penalty had been imposed on BlackRock Advisors for not reporting conflict of interest and the firm had also been fined $340,000 in 2017 for using separation agreements improperly.

This forced employees leaving the company to waive their ability to obtain whistleblower awards.

BlackRock has been monitored by the crypto community since June when the asset manager had filed a Bitcoin ETF application unexpectedly.

This investment product would provide Wall Street Investors exposure to the original crypto token without requiring them to own it.

For the last decade, the SEC has been denying every Bitcoin ETF application that has been submitted, citing the risk of market manipulation as the reason.

However, market analysts believe that the calculus is changed in the case of BlackRock, given the position it enjoys in the market and the almost perfect record of the company.

There have been rumors this week that the SEC could soon give approval for a Bitcoin ETF and BlackRock has begun preparations for its launch.