SEC Suspend BlockFi $30M Until Investors Are Reimbursed

Based on court documents, the U.S. Securities and Exchange Commission (SEC) has agreed to waive a $30 million penalty for BlockFi, a crypto lending platform.

BlockFi had filed for bankruptcy to reimburse its investors. This payment represents the remaining $50 million fine the platform owed the SEC as part of a settlement reached in February 2022. The allegations against BlockFi were related to its failure to register with regulatory authorities for offering and selling cryptocurrency lending products. The bankruptcy filing by BlockFi occurred in November 2022 after the collapse of FTX.

According to Sasha Hodder, the founder of Hodder Law, specializing in crypto law, the SEC could be one of the first creditors to receive payment from BlockFi.

In the ongoing Chapter 11 bankruptcy proceedings, the regulator had included “general unsecured claims” as part of its demands. However, to maximize the distribution of funds to investors and avoid delays, the SEC agreed to forgo the payment. This agreement was reached on June 22.

BlockFi, which had previously suspended withdrawals following the collapse of FTX, stated on June 12 that it anticipated completing the necessary testing for withdrawals, allowing some customers to start receiving their funds back during the summer.

The withdrawal process will be conducted in stages, and eligible individuals will receive a confirmation email. In the meantime, the platform advises users to set up third-party wallets for their withdrawals. Additionally, BlockFi plans to perform an interface upgrade before enabling users to withdraw their assets.