- BlockFi has agreed to refund $103,471 to its California clients, the Department of Financial Protection and Innovation (DFPI) says.
- BlockFi borrowers had continued repaying loans between November 11 and 22, even when they were not required to.
- BlockFi also agreed to an ”interim suspension” of its California Financing Law (CFL) license
Bankrupt crypto lender BlockFi has approved a request to refund $103,471 to its California clients that had continued to repay their loans even after trading stopped on November 10, 2022.
According to a Monday announcement by the state’s Department of Financial Protection and Innovation (DFPI), investigations revealed that at least 111 borrowers in California “continued remitting at least $103,471 in loan repayments to BlockFi’s servicer while they were unable to withdraw funds and collateral from BlockFi’s platform.” The loan repayments were made between November 11 and 22.
The government agency accuses BlockFi of failing to “provide timely notification to borrowers that they could stop repaying on their BlockFi loans.”
BlockFi froze deposits and withdrawals on its platform on November 11, 2022, following the demise of Sam Bankman-Fried’s crypto empire FTX. The lender’s exposure to FTX eventually led to the firm filing for Chapter 11 bankruptcy protection two weeks later.
According to the financial ombudsman, BlockFi only notified borrowers that they could stop repaying their loans ten days later.
BlockFi Agrees To The Refunds
According to official documents, BlockFi has agreed to refund $103,471 to its clients as part of the settlement with the DFPI. The refund will cover the fees clients pay for the interest accounts deemed as securities.
The DFPI statement read:
“BlockFi recently filed a motion in the bankruptcy court, requesting permission to direct its servicer to return these loan repayments.”
The refunds will be made once the motion is approved, with a hearing scheduled for April 19. 2023.
The regulator previously moved to suspend BlockFi’s lending license, issued in line with the California Financing Law, for 30 days beginning November 11, 2022. The agency moved on to revoke BlockFi’s license on December 15, 2022.
According to the DFPI, BlockFi has agreed to an “interim suspension” of its license “while the bankruptcy and revocation actions are pending.” BlockFi has also decided to modify its practices to comply with California law.
The platform will no longer offer interest accounts that are classified as securities. Instead, it will provide a new product that complies with California’s securities laws. BlockFi also agreed to a final order to discontinue and a cease and refrain order stemming from the company’s failure to notify borrowers that they could stop repaying their loans timely.
The embattled crypto lender has released a statement in response to the settlement with the DFPI, saying it is committed to complying with all regulatory requirements. BlockFi also noted that it has already implemented changes to its practices to comply with the DFPI’s requirements.
Earlier this month, BlockFi received a reprieve when the collapsed crypto-friendly Silvergate Bank said it would return the lender’s deposits amounting to $9.8 million.
