BlockFi to refund $103K to Californian users
Bankrupt crypto lender BlockFi will refund more than $100,000 to its California-based users who continued to repay loans even after the company halted client withdrawals following a liquidity crisis.
Subject to the bankruptcy court’s approval, BlockFi will direct its servicer to distribute $103,471 in refunds, the state’s Department of Financial Protection and Innovation (DFPI) said.
The DFPI added that that its probe found that the company didn’t provide “timely notification to borrowers” that they could stop repaying on their loans. This resulted in California borrowers remitting roughly $103,471 in loan repayments to BlockFi while they were unable to withdraw funds and collateral.
The state regulator previously suspended BlockFi’s lending license for 30 days and then moved to revoke the authorization in December. Today, the beleaguered cryptocurrency lender agreed to an interim suspension while the bankruptcy and revocation actions are pending.
BlockFi’s exposure to the spectacular collapse of Sam Bankman-Fried’s empire was greater than prior reports suggested.
According to unredacted filings that were mistakenly uploaded without redactions, BlockFi had over $1.2 billion in assets tied up with FTX exchange and its trading arm Alameda Research.
The New Jersey-based lender, which filed for Chapter 11 bankruptcy protection in late November, had $415.9 million in digital assets linked to FTX and $831.3 million in loans to Alameda. That compares to previous disclosures that showed $355 million frozen on the FTX platform, while the $671 million loaned to Alameda became trapped there. Bitcoin and ether have since rallied, lifting the value of those holdings.
On the other hand, BlockFi listed an outstanding $275 million loan to FTX.US and called the American arm of FTX’s now-bankrupt exchange as its second-largest creditor. This was due to FTX’s bailout of BlockFi in July 2022, which involved FTX providing the lender with a $400 million credit facility and the option to buy the company for up to $240 million.
The privately held firm, founded in 2017 by Zac Prince and Flori Marquez, filed for Chapter 11 bankruptcy protection nearly two weeks after halting withdrawals of customer deposits due to significant exposure to bankrupt exchange FTX.
Approximately eight additional affiliated companies are part of the proceedings, including its Bermuda subsidiary. In the 23-page bankruptcy filing, BlockFi indicates it has more than 100,000 creditors, with liabilities in the range of $1 billion to $10 billion. The company has $257 million in cash on hand, which it says will provide sufficient liquidity to support operations during the restructuring process.
