BlockFi to refund California borrowers over $100,000

Bankrupt cryptocurrency lender BlockFi has agreed to refund over $100,000 to California borrowers who continued to repay their loans after the platform halted withdrawals. 

California’s Department of Financial Protection and Innovation (DFPI) announced that BlockFi had approved its servicer to refund over $100,000 to the company’s borrowers in California, subject to approval from the bankruptcy court.

A DFPI investigation revealed that the lender did not notify borrowers promptly to stop repaying their loans after halting withdrawals on Nov. 11, 2022. Failure to make such notification resulted in at least 111 clients paying back a minimum of $103,471 to the platform’s servicer, with court documents stating that BlockFi only sent out a notice to borrowers on Nov. 22, 2022. 

DFPI also stated that BlockFi agreed to an interim suspension of its license, earlier suspended for 30 days starting from Nov. 11, 2022, which the Californian regulator also moved to revoke in December 2022. 

“Today, the company agreed to an interim suspension while the bankruptcy and revocation actions are pending. It also agreed to a final order to discontinue and a desist and refrain order, stemming from the company’s failure to timely notify borrowers that they could stop repaying their loans.”

California’s Department of Financial Protection and Innovation (DFPI)

BlockFi decided to suspend withdrawals and other activities after FTX’s shocking collapse. The lender later filed for Chapter 11 bankruptcy on Nov. 28, 2022. Meanwhile, BlockFi filed a motion with the bankruptcy court in February 2023 to enable its servicer to refund the loan repayments, with a hearing scheduled for April 19, 2023.