- The SEC has agreed to delay the collection of a $30 million fine from BlockFi to hasten and maximize repayments to the company’s investors.
- Despite the company filing for bankruptcy, a New Jersey court has stated that $300 million held in custodial wallets can be used to repay BlockFi customers.
The U.S. Securities and Exchange Commission (SEC) has opted to hold off on the collection of a $30 million fine from BlockFi, the now insolvent crypto lending platform, until investors have been recompensed, according to a court document filed on Thursday.
The remaining $30 million stems from a $50 million penalty that BlockFi agreed to pay the SEC in February 2022. The settlement was a result of charges brought against BlockFi for neglecting to register its crypto lending product offering with the regulator. However, the company filed for bankruptcy in November following the dissolution of crypto exchange FTX.
In the ongoing Chapter 11 bankruptcy proceedings, the SEC positioned its claims to be considered as part of “general unsecured claims”. Yet, in an effort to amplify the available funds for investors and avoid any potential delay in disbursements, the regulator decided to postpone the collection of its payment, as per the agreement reached on June 22.
Back in November, Sasha Hodder, founder of crypto-specialized Hodder Law, suggested to CoinDesk that the SEC would likely be among the initial creditors to receive payment from BlockFi. She commented,
“The customers are really at the bottom of the list here.”
In a more positive turn of events, a New Jersey bankruptcy court judge declared in May that BlockFi customers could be reimbursed from the $300 million held in custodial wallets on the platform.
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The insolvent entity has submitted a reorganization plan to the court, which is scheduled for a hearing in July. Despite its bankruptcy status, BlockFi maintains that the $1 billion claims against the defunct FTX crypto enterprise and its affiliate trading firm, Alameda, will be the “largest driver” of fund recoveries for both customers and creditors.