The United States Securities and Exchange Commission (SEC) has agreed to postpone the payment of a $30 million fine from bankrupt crypto lender BlockFi until creditors are paid back. The amount represents the balance of a $50 million settlement with the regulator from February 2022.
According to June 22 court filings, the SEC will forgo the amount owed by BlockFi to “maximize” and avoid delays in funds’ distribution to investors “until payment in full of all other Allowed Claims.” The document stated: “The Commission has agreed to forego participating in any distributions under the Plan or requiring any cash reserve in connection with such distributions.”
In February 2022, the SEC announced actions against the crypto lending company over its failure to register its high-yield interest accounts as securities. BlockFi agreed to pay $50 million to the regulator as part of the settlement and another $50 million to 32 U.S. states filing similar complaints.
According to court documents, the SEC was at the top of BlockFi creditor’s list, along with West Realm Shires Services Inc. (doing business as FTX US). BlockFi filed for Chapter 11 bankruptcy protection in late November after the FTX crisis raised questions about its financial health. According to its bankruptcy filing, BlockFi had $256.9 million in liquidity at that time.
On May 11, a federal judge granted BlockFi permission to return $297 million to customers with deposits held in its Wallet program. The refund did not apply to users of BlockFi Interest Accounts (BIA) that were used in its lending business and are property of the bankruptcy estates. BlockFi’s BIA accounts hold over $375 million.
BlockFi will also refund more than $100,000 to California customers who continued to repay loans even after the company halted trading on Nov. 10 last year. An investigation by California’s Department of Financial Protection and Innovation discovered that at least 111 borrowers in the state made roughly $103,471 in loan repayments after the bankruptcy filing.
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