U.S SEC Postpones $30M Penalty Payment of Insolvent BlockFi

• A $50 million settlement with the regulator was reached in February 2022.
• On May 11th, a federal court authorized BlockFi to refund $297 million to clients.

For the time being, Insolvent crypto lender BlockFi will be able to put off paying a $30 million penalty to the U.S. Securities and Exchange Commission. A $50 million settlement with the regulator was reached in February of 2022, and this is the remaining balance.

Court documents filed on June 22 indicate that the SEC would postpone its claim against BlockFi. In order to maximize and prevent delays in the release of cash to investors “until payment in full of all other Allowed Claims.”

Refund to Creditors Prioritized

Due to the firm’s refusal to register its high-yield interest accounts as securities. The SEC initiated enforcement procedures against the crypto lending company in February 2022. As part of the settlement, BlockFi agreed to pay $50 million to the SEC and another $50 million to 32 states in the United States who had lodged identical complaints.

The SEC and West Realm Shires Services Inc. (doing business as FTX US), according to court filings, was among BlockFi’s top creditors. Concerns about its financial stability prompted BlockFi to file for Chapter 11 bankruptcy in late November, after the FTX crisis. In its bankruptcy petition, BlockFi said that the company has $256.9 million in funds on hand.

On May 11th, a federal court authorized BlockFi to refund $297 million to clients who had funds stored in its Wallet service. Users of BlockFi Interest Accounts (BIA) that were utilized in the company’s lending operation and are part of the bankruptcy estates were not eligible for reimbursement. More than $375 million may be found in BlockFi’s BIA accounts.

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