Bankrupt cryptocurrency lender BlockFi has agreed to refund more than $100,000 to California customers who continued to make loan repayments even after trading was suspended on Nov. 10. According to a March 27 statement from California's financial regulator, the Division of Financial Protection and Innovation (DFPI), its investigation found that at least 111 borrowers in California repaid approximately $103,471 in loans between Nov. 11 and Nov. 22. .
The regulator alleges that BlockFi failed to "notify borrowers in a timely manner that they can stop repaying BlockFi loans." Borrowers were not informed until Nov. 22 that they could stop repaying BlockFi loans “until further notice,” DFPI claimed.
In a motion filed with the court on February 24, 2023, BlockFi asked the bankruptcy court to allow the payments to be returned to borrowers, according to the filing. If the motion is approved, the refunds will be able to proceed, with a hearing scheduled for April 19.
Meanwhile, DFPI said BlockFi has agreed to a “temporary suspension” of its California Financing Law (CFL) license while “insolvency and avoidance actions are pending.”
“If this motion is granted, BlockFi agrees to instruct servicers to promptly refund borrowers’ payments, including interest and late fees, and all funds disbursed after the platform was suspended on November 10,” the DFPI filing said. Unless the bankruptcy court rules otherwise, BlockFi's agreement to the temporary moratorium means that it will continue to instruct its agents to suspend the collection of loans, interest, and repayments for California customers, and "not to collect, levy, or assess any late payments related to any Payment-related fees, including when due."
BlockFi also agreed to continue not to report to credit bureaus delinquencies or defaults on loans by California residents on or after November 11, 2022, and to take “any action that may damage the credit scores of California residents on such loans.” According to DFPI, Commissioner Clothilde V. Hewlett previously suspended BlockFi’s lending license for 30 days beginning November 11, 2022, and revoked BlockFi’s CFL license on December 15, 2022.
BlockFi halted customer withdrawals on Nov. 10 and asked customers not to deposit into BlockFi wallets or interest accounts, citing the uncertainty surrounding the FTX crash. By Nov. 28, BlockFi filed for Chapter 11 bankruptcy protection for the company and its eight subsidiaries. BlockFi International filed for bankruptcy protection in the Supreme Court of Bermuda on the same day.
