The California Department of Financial Protection and Innovation (DFPI) permanently revoked the license of collapsed cryptocurrency lender BlockFi two years after its bankruptcy.
Announcing the news on Nov. 7, California’s DFPI said the license revocation came after an examination by the regulator following a suspension of BlockFi’s license in November 2022.
BlockFi entered into a settlement agreeing to the license revocation, and to desist and refrain from violations and cease unsafe practices, the DFPI said.
BlockFi breached license conditions
After suspending BlockFi’s license two years ago, the DFPI decided to completely revoke it after finding that the company had violated the California Financing Law (CFL).
BlockFi violated the CFL by failing to consider borrowers’ ability to repay their loans and charging borrowers interest before the loan proceeds were disbursed. The bankrupt crypto lending platform also failed to provide consumers with credit counseling and was unable to report payment performance to credit bureaus.
The regulator noted that BlockFi had also failed to disclose annual percentage rates accurately in loan disclosure documents.
DFPI Commissioner Clothilde Hewlett said:
“While we encourage innovation in our financial marketplace, companies must comply with laws and protect consumers to continue operating in California.”
Under the settlement agreement, the DFPI levied a $175,000 fine for BlockFi’s CFL violations but waived payment to prioritize consumer repayments because the company is in bankruptcy and no longer operating.
BlockFi shut down its web platform in May 2024
BlockFi’s license revocation in California comes a few months after the defunct crypto lender terminated its web platform in May. Following the shutdown, clients could no longer access the BlockFi platform.
BlockFi’s bankruptcy saga began after Sam Bankman-Fried’s FTX collapsed in November 2022, as the companies had significant exposure to each other.
In its Chapter 11 filing in November 2022, BlockFi said it had a “significant exposure” to FTX and its associated entities, providing FTX US with a $400 million credit line in July 2022. FTX US is also one of BlockFi’s top unsecured creditors, with a $275 million loan, according to Bloomberg.
In March, BlockFi reached an agreement for the estates of FTX and Alameda Research to pay it $875 million. The crypto lender started interim crypto distributions through the Coinbase crypto exchange in July 2024.
BlockFi was estimated to owe as much as $10 billion to more than 100,000 creditors in April 2023.