Bankrupt crypto lender BlockFi has agreed to refund more than $100,000 to California customers who continued to make loan payments despite ceasing trading on November 10 last year.
According to a March 27 statement from California’s financial watchdog, the Department of Financial Protection and Innovation (DFPI), the investigation found that at least 111 borrowers in California repaid approximately $103,471 in loan payments between November 11 and November 22.
The regulator alleged that BlockFi failed to “provide timely notice to borrowers that they could stop paying BlockFi loans.”
Californian @BlockFi registered: BlockFi to refund over $100k after failing to notify borrowers about stopping repayments post-FTX crash. The motion was tabled, with a hearing scheduled for April 19, 2023. Updates will follow. More info: https://t.co/bJkiyfgA1b #FTX #BlockFi #CryptoRefund pic.twitter.com/u0QpwY6oou
– CA Department of Financial Protection & Innovation (@CaliforniaDFPI) March 27, 2023
DFPI claims that borrowers were not notified until November 22 that they could stop repaying BlockFi Loans “until further notice.”
According to the documents, BlockFi is seeking permission from the bankruptcy court to return these payments to borrowers in a motion filed in court on February 24, 2023.
Refunds will be possible if the motion is approved, with a hearing scheduled for April 19.
Meanwhile, DFPI said BlockFi has agreed to an “interim suspension” of its California Financing Law (CFL) license while “bankruptcy and revocation proceedings are pending.”
“If this motion is granted, BlockFi agrees to direct the Servicer to repay the borrowers’ payments in a timely manner, including interest and late fees and all funds paid after the November 10 platform pause,” according to the DFPI document.
Unless regulated by the bankruptcy court, the regulator said BlockFi’s agreement to the interim suspension means that it will continue to direct the agent to pause the collection of repayments for California customers on loans, interest payments and “not to charge, levy, or assess any delay. fee associated with any payment anyway, including at maturity.”
BlockFi has also agreed to continue not reporting to credit agencies that loans from California residents have become delinquent or defaulted on or after November 11, 2022, and will not take “any action that could damage the credit score of California residents on such loans.”
related: BlockFi is not in immediate danger, despite the exposure of Silicon Valley Bank: Report
According to DFPI, Commissioner Clothilde V. Hewlett previously suspended BlockFi’s lending license for 30 days from November 11, 2022 and moved to revoke BlockFi’s CFL license on December 15, 2022.
BlockFi stopped client withdrawals and asked clients not to deposit into BlockFi wallets or Interest Accounts on November 10th, due to lack of clarity about FTX’s collapse.
Today, BlockFi filed a voluntary case under Chapter 11 of the US Bankruptcy Code.https://t.co/adaAx6me4r
– BlockFi (@BlockFi) November 28, 2022
As of November 28, BlockFi filed for Chapter 11 bankruptcy for the company and eight of its subsidiaries. BlockFi International filed for bankruptcy with the Supreme Court of Bermuda on the same day.