Bankrupt crypto lender BlockFi will pay back over $100,000 to its California clients, according to an announcement by the Department of Finance Protection and Innovation (DFPI) on Monday. The affected clients will be serviced with their loans pending the bankruptcy court’s approval, with the hearing scheduled on April 19, 2023.
The DFPI discovered that the New Jersey-based crypto lender failed to provide timely information to clients that it would stop repaying their loans, causing the borrowers to pay $103,471 to the BlockFi servicer. The clients were then unable to recall their funds and collateral used to collect loans from the firm.
Among other duties, the DFPI is responsible for protecting customers and regulating financial services, businesses, and professionals. Founded in July 2013, the DFPI’s jurisdiction of protection is Californian citizens.
BlockFi Filed for Repayment
According to reports from DFPI, BlockFi filed for the repayment of the lately deposited funds to its California clients. Since the customers remitted the funds when the crypto lender halted withdrawals and failed to warn the clients to desist from depositing, BlockFi agreed to direct its servicer to refund them.
BlockFi halted activities on its platform and paused withdrawal in November after its exposure to the FTX capitulation. Following its ability to survive the harsh consequences of the liability, the crypto lender filed for bankruptcy on November 28, the same year.
Faced with a $600 million credit risk last year, BlockFi followed a long list of crypto lenders to file for bankruptcy. Voyager and Celsius filed for bankruptcy last year after disclosing they had a lot of under-collateralized loans. BlockFi declared after its bankruptcy filing that it has $355 million stuck in FTX following the exchange’s collapse.
DPFI Moves to Suspend BlockFi’s License
Reports by the California regulator also showed it moved to suspend BlockFi’s lending license. The DPFI made the move in November, issuing a pursuant to the California Financing Law.
BlockFi agreed to the temporary suspension today, but the move to revoke its license is still pending. The crypto lender had struggled financially even before its demise, FTX US rescued BlockFi by striking a $640 million deal to save the company at that time.
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