The U.S. Securities and Exchange Commission (SEC) has announced a postponement in collecting a fine of $30.2 million from the now-defunct cryptocurrency lender, BlockFi. This decision was revealed in a court filing made on June 22, as part of an agreement between the SEC and BlockFi. The agreement recognizes the importance of prioritizing the repayment of investors over the settlement of fines.
Previously, in February 2022, BlockFi had agreed to pay a fine of $50 million to the SEC due to its failure to register its lending product. Concurrently, the lender also agreed to pay an additional $50 million in fines to resolve similar charges across 32 states.
However, BlockFi filed for bankruptcy in November 2022, shortly after FTX and its sister firm Alameda Research experienced setbacks. At the time of the bankruptcy filing, BlockFi still owed $30.2 million of the $50 million settlement to the SEC. The court filing from the SEC clarified that its claim for penalties against BlockFi falls under “general unsecured claims,” entitling the agency to participate in the recovery of funds alongside other unsecured creditors. Nonetheless, to optimize the amount that can be distributed to investors and prevent any delays in such distribution, the SEC has chosen to forego its claim until all BlockFi users are fully repaid.
In March, BlockFi received authorization to reimburse certain users in California with amounts exceeding $100,000. Last month, a bankruptcy court ruling permitted BlockFi to return nearly $300 million held in its custodial wallets to users. Simultaneously, the court determined that the $375 million in funds that users attempted to withdraw from their accounts around the time of the bankruptcy filing belong to the estate. BlockFi currently holds approximately $1.2 billion in claims against FTX and Alameda.
