SEC Grants Waiver On BlockFi’s $30M Fine Pending Creditor Payment

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The U.S. SEC held the highest position on the list of BlockFi creditors, with a settlement balance of $30 million since February 2022.

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The United States Securities and Exchange Commission (SEC) has agreed to delay the payment of a $30-million fine imposed on bankrupt crypto lender BlockFi. This payment will be postponed until the creditors have been fully repaid. The $30-million fine represents the remaining balance of a $50-million settlement reached with the SEC in February 2022.

Based on court filings on June 22, the SEC has decided to waive the amount owed by BlockFi. The purpose of this move is to ensure a smooth and efficient distribution of funds to investors. The SEC has agreed not to participate in any distributions under the Plan or demand a cash reserve in relation to such distributions, allowing other claims to be paid in full before addressing its own claim.

In February 2022, the SEC took action against BlockFi, a crypto lending company, for not registering its high-yield interest accounts as securities. BlockFi agreed to settle the case by paying $50 million to the SEC and an additional $50 million to 32 U.S. states that had filed similar complaints.

As per court documents, the SEC and FTX US (operating as West Realm Shires Services Inc.) were listed as the top creditors of BlockFi. BlockFi sought Chapter 11 bankruptcy protection in November after concerns about its financial stability arose due to the FTX crisis. According to BlockFi’s bankruptcy filing, the company had $256.9 million in liquidity at that time.

In a ruling on May 11, a federal judge authorized BlockFi to reimburse customers with deposits totaling $297 million through its Wallet program. However, this refund did not extend to users of BlockFi Interest Accounts (BIA) associated with the lending aspect of its business, as those funds are considered assets of the bankruptcy estates. The BIA accounts of BlockFi currently hold over $375 million.

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BlockFi has committed to refunding over $100,000 to its California customers who made loan repayments after the company suspended trading on November 10 of the previous year. California’s Department of Financial Protection and Innovation conducted an investigation and found that approximately 111 borrowers in the state had made loan repayments totaling around $103,471 following the bankruptcy filing.

Important: This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.

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