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The U.S. Securities and Exchange Commission (SEC) has agreed to delay paying a $30 million fine from bankrupt cryptocurrency creditor BlockFi until the creditors return the money. This amount represents the balance of $50 million in settlements with the regulator since February 2022.
According to court documents dated June 22, the SEC will waive the amount owed to BlockFi in order to “maximize” and avoid delays in distributing funds to investors “until full payment of all other permitted claims.” The document stated: “The Commission has agreed to waive participation in any distributions under the Plan or to require any cash reserves in connection with such distributions.”
In February 2022, the SEC announced action against a cryptocurrency lending company for failing to register its high-yielding interest-bearing accounts as securities. BlockFi agreed to pay the regulator $50 million as part of the settlement and another $50 million to 32 US states that filed similar complaints.
According to court documents, the SEC was at the top of BlockFi’s list of creditors along with West Realm Shires Services Inc. (doing business as FTX US). BlockFi filed for Chapter 11 bankruptcy protection in late November after the FTX crisis raised questions about its financial condition. According to the bankruptcy filing, BlockFi had $256.9 million in liquidity at the time.
On May 11, a federal judge authorized BlockFi to return $297 million to customers with deposits held in the Wallet program. The refund does not apply to users of BlockFi interest-bearing accounts (BIA) that were used in its lending business and are the property of the bankruptcy estate. There are more than $375 million in BIA BlockFi accounts.
BlockFi will also return more than $100,000 to California customers who continued to pay back loans even after the company ceased trading on November 10 last year. An investigation by the California Department of Financial Protection and Innovation found that at least 111 borrowers in the state paid approximately $103,471 in loan repayments after filing for bankruptcy.