June 23, 2023 11:33 AM | 2 min read
The U.S. Securities and Exchange Commission (SEC) consented to defer the collection of a $30 million fine from the insolvent crypto lending platform BlockFi until such time as the investors have been reimbursed.
What Happened: Initially, BlockFi was under obligation to pay a $50 million penalty to the SEC to resolve allegations of not having registered its crypto lending product with the regulatory body.
BlockFi conceded to the settlement in February 2022.
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In November, it entered bankruptcy proceedings following the downfall of the cryptocurrency exchange FTX.
The SEC claimed its outstanding payments should be treated as “general unsecured claims” amidst BlockFi’s ongoing Chapter 11 bankruptcy process.
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Notwithstanding, the regulator decided to hold off on receiving the payment with the aim to “maximize the amount that may be distributed to investors and avoid delay in such distribution,” as stated in the agreement that was concluded on June 22.
In May, a judge in a New Jersey bankruptcy court declared that BlockFi’s customers are eligible to receive $300 million from funds stored in custodial wallets on its platform.
Why It Matters: While BlockFi’s bankrupt estate has submitted a restructuring plan to the court, which is slated for review in a July hearing, BlockFi has indicated that the $1 billion in claims against the collapsed crypto company FTX and its affiliate trading entity Alameda will be the “largest driver” of recovering funds for customers and creditors.
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