Defunct cryptocurrency lender, BlockFi, has agreed to reimburse over $100,000 to its California clients, who continued to repay loans despite a trading suspension on November 10, 2022.
On March 27, 2023, the Department of Financial Protection and Innovation (DFPI), California’s financial watchdog, reported that their investigation revealed that at least 111 borrowers in California had made loan repayments totalling around $103,471 between November 11, 2022, and November 22, 2022, despite a trading suspension. The agency alleges that BlockFi failed to provide timely notice to borrowers that they could stop repaying their loans.
Californian @BlockFi users: BlockFi to refund over $100k after failing to notify borrowers about halting repayments post-FTX crash. The motion was filed, with a hearing set for April 19, 2023. Updates to follow. More info: https://t.co/bJkiyfgA1b #FTX #BlockFi #CryptoRefund pic.twitter.com/u0QpwY6oou
— CA Department of Financial Protection & Innovation (@CaliforniaDFPI) March 27, 2023
According to the DFPI’s report, BlockFi has filed a motion with the bankruptcy court seeking authorization to instruct its servicer to refund these loan repayments. The hearing is scheduled for April 19, 2023.
The refunds result from BlockFi’s actions during the crash of the FTX cryptocurrency exchange. Due to its exposure to FTX, BlockFi halted operations on its platform and prohibited consumer withdrawals on November 10, 2022. On November 28, 2022, BlockFi filed for Chapter 11 bankruptcy. However, the company failed to promptly inform borrowers that they could stop repaying their debts.
On November 11, 2022, Clothilde V. Hewlett, the Commissioner of the Department of Financial Protection and Innovation (DFPI), suspended BlockFi’s lending license for 30 days. On December 15, 2022, the Commissioner took further action by moving to revoke the suspended license. The company agreed to the temporary suspension while its insolvency and revocation proceedings are ongoing.
The regulator stated that BlockFi’s acceptance of the temporary suspension means that it will continue to instruct its agents to stop collecting loan and interest payments from California customers as well as refrain from charging, levying, or assessing any late fees related to payments, including those due at maturity.
It was earlier reported that BlockFi announced that it would release a comprehensive financial analysis detailing its assets, liabilities, and general financial situation, including any transactions leading up to the bankruptcy on January 11, 2023.
One of the crucial documents that BlockFi will need to provide is the Schedule of Assets and Liabilities, which lists all the assets and liabilities held by the company. This document will aid the court in understanding the company’s complete financial status, enabling them to determine the optimal strategy for restructuring or selling the company’s assets.
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