Bankrupt BlockFi to Reimburse $100,000 to its California Customers

Photo by Christian Dubovan on Unsplash

The now-defunct cryptocurrency lending platform BlockFi has indicated that it will reimburse a total of $103,471 to its customers in the state of California.

The new information was conveyed to the public through a statement (1) that was made on Monday by the California Department of Financial Protection and Innovation (DFPI).


Troubles of BlockFi

BlockFi was found guilty of not informing its customers that they could stop making loan repayments.

The conclusion that resulted in this judgment was reached as a consequence of an inquiry conducted by the DFPI.Β The investigation findings revealed that BlockFi did not tell its customers promptly that they might cease repaying their loans.

During that same period, the platform had already put a hold on withdrawals.

Over the course of the inquiry conducted by the DFPI, it was discovered that BlockFi continued to receive payments totaling up to $103,471 from at least 111 California debtors via its servicer.

Borrowers who were unaware of the situation continued to make loan repayments between November 11 and November 22, even though they were no longer required to.

Yet it wasn’t until November 22 that the cryptocurrency lender made the official announcement that borrowers were allowed to suspend repaying debts “until further notice.”

BlockFi has now given their approval for the request to issue the refunds to the impacted former customers after the conclusion of the inquiry that was conducted by DFPI.

Nevertheless, the decision will be conditioned upon the bankruptcy court’s authorization. Here is what the DFPI document says in one section:

“BlockFi agrees to order the Servicer to timely restore borrowers’ payments, including interest and late fees, as well as any funds paid after the November 10 platform halt,” the motion reads. “If this motion is approved, the platform will remain paused.”

The failure of the FTX exchange in November of last year caused a significant loss of revenue for BlockFi. Because of the exposure, it decided on November 11, 2022, to stop allowing customers to withdraw money from their wallets or make deposits to interest accounts.

And then, just over two weeks later, BlockFi ultimately submitted a petition for protection under Chapter 11 bankruptcy for the company as a whole as well as its eight subsidiaries. Moreover, a bankruptcy petition was submitted by BlockFi International to the Supreme Court of Bermuda on the same day.

According to the statement made by the DFPI, a hearing is going to take place on April 19, and it is related to the request for a refund.

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