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Bankrupt and now defunct BlockFi has entered into a settlement agreeing to the license revocation and to cease unsafe practices.
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The California Department of Financial Protection and Innovation (DFPI) has permanently revoked the license of bankrupt cryptocurrency lender BlockFi two years after bankruptcy.
Announcing the news on Nov. 7, California’s DFPI mentioned that the license revocation resulted from an examination by the regulator after it suspended BlockFi’s license in November 2022.
BlockFi also entered into a settlement agreeing to the license revocation, to desist and refrain from the violations and to cease unsafe practices, the DFPI said.
BlockFi breached license conditions
After suspending BlockFi’s license two years ago, the DFPI decided to completely revoke the license after finding that the company violated the California Financing Law (CFL).
BlockFi violated the CFL by failing to consider borrowers’ ability to repay their loans and charging borrowers interest before the loan proceeds were disbursed. The bankrupt crypto lending platform also failed to provide consumers with credit counseling and was unable to report payment performance to credit bureaus.
The California state regulator noted that BlockFi failed to disclose annual percentage rates accurately in loan disclosure documents.
DFPI Commissioner Clothilde Hewlett stated:
“While we encourage innovation in our financial marketplace, companies must comply with laws and protect consumers to continue operating in California.”
Under the settlement agreement, the DFPI levied a $175,000 fine for BlockFi’s CFL violations but waived payment of the fine to prioritize consumer repayments because the company is in bankruptcy and is no longer operating.
BlockFi shut down its web platform in May 2024
BlockFi’s license revocation in California comes a few months after the defunct crypto lender terminated its web platform in May 2024. Following the shutdown, clients could no longer access the BlockFi platform.
BlockFi’s platform shutdown announcement in May 2024. Source: BlockFi
BlockFi’s bankruptcy saga began after Sam Bankman-Fried’s FTX collapsed in November 2022, as the companies had significant exposure to each other.
In its Chapter 11 filing in November 2022, BlockFi said it had a “significant exposure” to FTX and its associated entities, providing FTX US with a $400 million credit line in July 2022. FTX US is also one of BlockFi’s top unsecured creditors, with a $275 million loan, according to Bloomberg.
Related: Cyprus regulator extends FTX suspension to May 2025
In March 2024, BlockFi reached an agreement with the estates of FTX and Alameda Research worth $875 million. The crypto lender started the first interim crypto distributions through the Coinbase crypto exchange in July 2024.
BlockFi’s total liabilities were estimated to range from $10 billion to over 100,000 creditors in April 2023.
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This article first appeared at Cointelegraph.com News
