Will BlackRock Scams and FUD Cripple Its Bitcoin ETF?
The SEC has accepted BlackRock’s application for a Bitcoin ETF for review, bringing us closer to the launch of the first spot Bitcoin exchange-traded fund (ETF) in the US. However, the world’s largest asset manager faces potential hurdles to the product’s acceptance. The barriers have to do with recent scandals and attendant reputational fallout.
BlackRock, the world’s largest asset manager with over $9.4 trillion in assets, applied for its inaugural spot Bitcoin ETF on June 15. The product has been the subject of eager anticipation in the finance and cryptocurrency communities. A Bitcoin ETF allows investors to gain exposure to Bitcoin without directly owning the cryptocurrency. Clearly a step forward for institutional investment, and a boon for BlackRock.
BlackRock Spot Bitcoin ETF Application Currently Being Reviewed by the SEC
On January 5, 2023, the agency took action against Randy Robertson. A former portfolio manager at BlackRock Advisors, LLC. He allegedly failed to share a conflict of interest from his connection to a film distribution company, in which the fund he managed invested millions.
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The investigation revealed that BlackRock Multi-Sector Income Trust (BIT), a publicly traded fund, had provided loans up to $75 million to subsidiaries of Aviron Group, LLC, which financed movie ads.
Robertson consented to the SEC’s findings without admitting or denying them. He agreed to pay a penalty of $250,000. The former BlackRock employee also accepted a cease-and-desist order and official censure.
Furthermore, Blackrock’s blending of social and fiscal policy does not sit well with powerful figures in the Republican Party. BlackRock has come under fire from conservative firebrand governor of Flordia, Ron DeSantis.
The candidate for the 2024 GOP nomination has criticized big fund managers for prioritizing social and environmental (ESG) objectives. And for sacrificing the traditional goals of maximizing returns for investors.
Republican politicians at both the state and federal levels have joined the chorus. In December 2022, DeSantis pulled $2 billion worth of Florida’s assets from “woke” BlackRock.
We Are Democratizing Investing in Crypto, Says CEO
The world’s largest asset manager is no stranger to controversy. In 2018, prosecutors searched the firm’s Munich offices in what Reuters called the biggest fraud investigation in Germany since the Second World War.
BlackRock reportedly exploited a tax loophole called “cum-ex,” stealing from the government in the process. Allegedly, financial institutions engaged in a scheme where they traded dividend-paying shares among each other. Company figures allegedly timed the trades to enable multiple institutions to claim tax refunds.
According to tax laws, each refund should have been subject to the claim of only one party.
Amid the turmoil, BlackRock has been one of the financial world’s titans to begin embracing cryptocurrency, but particularly Bitcoin. Other firms followed suit after BlackRock’s initial Bitcoin ETF application, including Invesco, Wisdom Tree, Bitwise, and Fidelity.
“We believe we have a responsibility to democratize investing. We’ve done a great job, and the role of ETFs in the world is transforming investing. And we’re only at the beginning of that,” Larry Fink, BlackRock’s CEO, told CNBC’s Squawk on the Street on July 14.
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