Bankrupt BlockFi to refund over $100K to California clients

• BlockFi filed for Chapter 11 bankruptcy on November 28.
• Some Califonia users continued to repay their loans between November 11 and November 22
• Users were not notified until November 22 that they could stop repaying their Loans “until further notice.”

California’s financial watchdog, the Department of Financial Protection and Innovation (DFPI), had previously suspended BlockFi’s lending license for 30 days from November 11, 2022, before later revoking BlockFi’s CFC license on December 15, 2022.

BlockFi halted client withdrawals on November 2022 and requested clients to deposit funds to BlockFi wallets or Interest Accounts for lack of clarity around the FTX collapse. The crypto lender later voluntarily filed for Chapter 11 Bankruptcy on November 28, 2022, alongside its eight other subsidiaries.

The DFPI claimed that BlockFi failed to “provide timely notification to borrowers that they could stop repaying their BlockFi loans.” The watchdog claims that the crypto lender did not notify borrowers until November 2022 that they could stop repaying their BlockFi loans “until further notice.”

About 111 California BlockFi users to get refunded

According to a statement issued by DFPI on March 27, investigations showed that at least 111 BlockFi borrowers from California continued paying their loans between November 11 and November 22, 2022. These borrowers paid back about $103,471 in loan repayments between the said periods.

BlockFi requested permission from the bankruptcy court to return the payments to the borrowers in a motion filed on February 24, 2023. The crypto lender has agreed to refund more than $100,000 to the California customers that continued repaying their crypto loans even after trading halted operations on November 10, 2022.

The hearing for the request to refund the customers is scheduled for April 19, 2023. The refunds will go ahead if the motion is approved by the bankruptcy court.

In the meantime, BlockFi has agreed to an “interim suspension” of its California Financing Law (CFL) license while “the bankruptcy and revocation actions are pending.”