The U.S. Securities and Exchange Commission (SEC) said in a release on Tuesday that BlackRock Advisors LLC has consented to pay a $2.5 million fine for misrepresenting investments in the entertainment sector.
The fact that the development aligns with rumors around BlackRock’s spot Bitcoin ETF makes it very interesting.
What Went Wrong for BlackRock?
As stated by the SEC
BlackRock’s Multi-Sector Income Trust made significant investments in Aviron Group, a company that specialized in creating advertising campaigns for motion pictures, between 2015 and 2019. BlackRock misrepresented Aviron as a “Diversified Financial Services” organization in several annual and semi-annual reports, despite the company’s involvement in the trust’s portfolio. Furthermore, BlackRock represented that Aviron had paid greater interest rates than had actually occurred. Later, BlackRock discovered the differences and made the necessary corrections in 2019.
Salvatore Massa and Brian Fitzpatrick, who are also members of the Enforcement Division’s Asset Management Unit, oversaw Andrew Dean and Corey Schuster while they conducted the SEC’s investigation.
Parallel Occurrences: The Spot Bitcoin ETF Case
The day that BlackRock’s spot Bitcoin ETF was listed on the Depository Trust & Clearing Corporation (DTCC) was also the day that the SEC made its announcement against the company. The DTCC listing, according to senior Bloomberg ETF analyst Eric Balchunas, is “all part of the process” of introducing a Bitcoin ETF to the market. Though it disappeared from the DTCC platform for a few hours before making a reappearance, the spot Bitcoin ETF confused market observers.
The iShares Bitcoin ETF has been listed on the platform since August, according to a DTCC representative, who also noted that the listing does not indicate that regulatory approval is imminent.
The SEC’s move against BlackRock may have wider ramifications for cryptocurrency legislation. The current allegation came during an intensified period of SEC scrutiny over companies handling bitcoin holdings. This is especially significant because BlackRock and other financial firms are awaiting the SEC’s judgment about their individual applications for Bitcoin ETFs. Even though BlackRock has since remedied the errors in its reporting, the accusation casts doubt on the firm’s managerial abilities and especially on the SEC’s perspective as it awaits clearance for its cryptocurrency investment products.