According to a Tuesday release from the U.S. Securities and Exchange Commission (SEC), BlackRock Advisors LLC has agreed to a $2.5 million fine for failing to accurately describe investments in the entertainment industry.
This development is of particular concern because it coincides with speculation surrounding BlackRock's spot Bitcoin ETF.
What's Wrong with BlackRock?
from 2015 to 2019, BlackRock's Multi-Sector Income Trust made a large investment in Aviron Group, a company that specializes in developing advertising plans for films. Despite the company's role in the trust's portfolio, BlackRock misrepresented Aviron as a “Diversified Financial Services” entity in several annual and semi-annual reports. Additionally, BlackRock claimed the interest rates paid by Aviron were higher than they actually were. The discrepancy was later identified and corrected by BlackRock in 2019.
The SEC investigation was led by Salvatore Massa and Brian Fitzpatrick under the supervision of Andrew Dean and Corey Schuster, all part of the Enforcement Division's Asset Management Unit.
Parallel Events: The Case of Bitcoin Spot ETFs
The SEC's announcement against BlackRock came on the same day that the company's Bitcoin ETF appeared on the Depository Trust & Clearing Corporation (DTCC) list. Eric Balchunas, Bloomberg senior ETF analyst, noted that the DTCC listing was “all part of the process” of bringing a Bitcoin ETF to market. However, the spot Bitcoin ETF disappeared from the DTCC platform for several hours before reappearing, causing confusion among market observers.
A DTCC spokesperson clarified that the iShares Bitcoin ETF has been on the platform since August and stated that the listing is not a signal of impending regulatory approval.
The recent allegations come amid increased scrutiny from the SEC on companies dealing in cryptocurrency assets – and the SEC's action against BlackRock could have larger implications for crypto regulation. This is especially important as BlackRock, along with other financial institutions, are awaiting the SEC's decision regarding their respective Bitcoin ETF applications. Although BlackRock has corrected its reporting inaccuracies, the allegations raise questions about how the SEC views the company's managerial competence, especially as it awaits approval for its crypto investment products.
