Executives of Blockchain.com, a cryptocurrency firm valued at $6.3 billion (£5 billion), are facing legal action due to their failure to submit the company’s financial reports on time.
Nicolas Cary, co founder and president and operating director Al Turnbull were both issued summons in May by Companies House initiating proceedings against them.
The case started at Cardiff Magistrates’ Court on September 25 and then adjourned until November 26 for a hearing.
The seriousness behind the consequences of ignoring the cryptocurrency industry’s financial reporting requirements doesn’t come slimmer for the biggest players in the business with this legal action.
Specific Reporting Failures and Legal Responsibilities
The lawsuit as seen in the report focuses on two specific instances of delayed financial reporting. The billion dollar company is said to have only tendered its 2020 year-end accounts in this present month, significantly past the deadline. Additionally, the company failed to submit its annual accounts for the year ending December 2022.
Under UK law, directors or designated members are personally responsible for ensuring timely submissions of financial reports. While companies may request extensions for unforeseen events, such requests must be made before the application deadline.
The potential consequences of these reporting failures are severe, with convicted parties potentially facing unlimited fines.
Company’s Response and Justification
In response to the recent legal action, the company addressed the issue in its recently filed 2020 accounts which was just submitted. The company stated that its directors had retained legal counsel and planned to defend the case.
Blockchain.com attributed the delay in filing to corporate restructuring and a “significant reduction in headcount,” which they claim “will take some time to stabilize.” This explanation provides insight into the internal challenges the company has been facing, which have apparently impacted its ability to meet regulatory requirements.
The company, which employs hundreds of people globally, asserted that its directors were taking “appropriate steps to ensure the company complies with all statutory annual filing requirements” moving forward.
Implications and Industry Context
This legal action against Blockchain.com executives underscores the increasing scrutiny that cryptocurrency firms face as they grow and integrate into the broader financial ecosystem.
As these companies achieve multi-billion dollar valuations, regulators and authorities expect them to adhere to the same standards of financial reporting and transparency as traditional financial institutions.
The case serves as a reminder to other cryptocurrency firms of the importance of maintaining compliance with regulatory requirements, even during periods of rapid growth or internal restructuring.
It also highlights the personal liability that executives may face for their companies’ regulatory failures, potentially setting a precedent for how similar cases might be handled in the future within the cryptocurrency industry.