The United States Securities and Exchange Commission (SEC) has offered relief to US-based digital asset lender BlockFi by relinquishing their $30 million fine until investors are reimbursed.
BlockFi Receives Temporary Relief On $30 Million Penalty
According to a court document filed on June 22, bankrupt BlockFi has been directed by the US financial regulator SEC to reimburse its investors before clearing its $30 million charge. This sum represents what is left of the total $50 million penalty incurred by the crypto lender company last year.
In February 2022, the Securities and Exchange Commission penalized BlockFi for failing to register the offers and sales of its retail crypto lending product, BlockFi Interest Accounts (BIAs), to American investors. Although the company never admitted or denied the SEC’s findings, it agreed to pay a $50 million penalty and cease the sale of BIAs in the United States.
It is worth noting that BlockFi was fined an additional $50 million by regulators in 32 states, who also charged the company with violating securities laws in the same month.
That said, the lending platform filed for bankruptcy in November following the infamous collapse of the FTX Exchange. BlockFi reported a $1 billion hole in its balance sheet, with more than 100,000 creditors with liabilities amounting to $10 billion.
Yesterday, the Securities and Exchange Commission asked to delay the payment of the outstanding $30 million fine by BlockFi. This move is to help “maximize the amount that may be distributed to investors and avoid delay in such distribution”.
However, no action has been taken by state regulators thus far. Whether they will temporarily waive their fines or press on with their charges remains to be seen.
Could SEC Decision Hasten BlockFi $300 Million Repayment?
BlockFi’s efforts to recover customers’ funds and pay off their fines began early in the year. On January 30, 2023, the digital asset lender received the court’s approval to sell off its crypto mining assets to provide liquidity for paying clients and regulators.
Later in May, a New Jersey judge ruled that the $300 million in the BlockFi custodial wallets should be returned to users rather than the company’s estate. Following the relief offered by the SEC, clients seem more likely to receive these funds.
That said, court documents reveal that fund recoveries for investors and customers of the bankrupt BlockFi will depend largely on the company’s claims against collapsed FTX Exchange and its trading firm Alameda. The crypto lending platform has roughly $355 million worth of crypto frozen on FTX and an additional $671 million in a loan to Alameda.
by Opeyemi Sule via Bitcoinist.com
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