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The bankrupt crypto lending platform BlockFi will provide refunds to California-based customers, according to a report from state regulators on March 27.
California users to receive refunds
The California Department of Financial Protection and Innovation (DFPI) said that eligible users will receive more than $100,000 in refunds following court approval.
The regulator said that at the time of BlockFi’s bankruptcy last November, the company did not inform customers in a timely manner that they no longer needed to repay loans. This caused users in California to pay about $103,471 to BlockFi’s servicer unnecessarily.
Though BlockFi previously filed a motion to have its servicer return those funds, the matter will not be fully decided until a hearing on April 19.
The DPFI noted that its commissioner moved to suspend BlockFi’s lending license in November and did so shortly after. It also moved to revoke that license in December. BlockFi agreed to related orders today, tied to its failure to update customers in a timely manner.
BlockFi may owe billions to creditors
BlockFi initially paused customer withdrawals on Nov. 11, 2022, around the time of FTX’s collapse. It filed for bankruptcy on November 28, 2022.
Today’s refunds make up only a small portion of the total amount that BlockFi owes to its creditors. The company said in its earliest bankruptcy filings that it had between $1 billion and $10 billion of liabilities. It owes at least $1.3 billion of that amount to large creditors such as Arkara Trust, FTX US, and the U.S. SEC rather than individual users.
The company’s bankruptcy proceedings are still ongoing, and it is still unclear when users may regain access to the entirety of their deposited funds.
Though BlockFi took steps towards repaying users as early as December, that measure only applied to certain funds. At present, some customers may need to submit proofs of claim, which BlockFi will accept until the end of March.
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