Texas is the latest state looking to crack down on beleaguered crypto lending platform BlockFi, according to a notice published today by the Texas State Securities Board.

State regulators have filed for a cease-and-desist against BlockFi and two of its subsidiaries, BlockFi Lending and BlockFi Trading, over an alleged sale of unregistered securities.

At issue is an investment product called the BlockFi Interest Account, which promises high returns in exchange for banked cryptocurrency, such as Bitcoin.

BlockFi is promoting 10% APY on stablecoin balances. What are customers risking to get that kind of eye-popping interest? (Image: Decrypt)

Can BlockFi Be Trusted with Your Bitcoin?

On May 17, some customers of cryptocurrency lender BlockFi noticed something unusual: huge Bitcoin deposits in their accounts. These deposits—in one case more than 700 BTC according to a Reddit user (worth $29 million at the time)—were expensive mistakes that BlockFi later owned up to. In a promotional campaign gone wrong, the company had sent rewards denominated in Bitcoin, rather than in GUSD, a $1-pegged stablecoin created by the crypto exchange Gemini.  Because of its error, BlockFi has had...

New Jersey was the first state to go after BlockFi for its alleged dealings in unregistered securities, filing a cease-and-desist earlier this week. Just yesterday, Alabama regulators hit the company with a show-cause notice—essentially a threat, asking BlockFi to defend itself against a potential cease-and-desist.

In a tweet yesterday, the company wrote that "the BlockFi Interest Account is not a security."

A judge at the State Office of Administrative Hearings (SOAH) will decide in October whether BlockFi can continue operating in Texas.

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