- BlockFi submitted for Chapter 11 bankruptcy on November 28.
- Some Californian borrowers kept on making payments from November 11 to November 22.
- Borrowers were not warned until November 22 that they could stop repaying their loans “until further notice.”
California’s financial authority, the Department of Financial Protection and Innovation (DFPI), had previously halted BlockFi’s lending license for 30 days from November 11, 2022, and then revoked BlockFi’s CFC license on December 15, 2022.
BlockFi blocked client withdrawals on November 2022 and requested clients to deposit funds to BlockFi wallets or Interest Accounts due to a lack of clarity around the FTX collapse. The crypto lender then voluntarily submitted for Chapter 11 Bankruptcy on November 28, 2022, alongside its eight other subsidiaries.
The DFPI argued that BlockFi failed to “provide timely notification to borrowers that they could stop repaying their BlockFi loans.” The watchdog stated that the crypto lender did not inform borrowers until November 2022 that they could stop repaying their BlockFi loans “until further notice.”
Around 111 California BlockFi users to get refunded
Based on a declaration issued by DFPI on March 27, investigations showed that at least 111 BlockFi borrowers from California continued to pay their loans between November 11 and November 22, 2022. These borrowers paid back about $103,471 in loan repayments between the said periods.
BlockFi asked for permission from the bankruptcy court to return the payments to the borrowers in a motion filed on February 24, 2023. The crypto lender has agreed to reimburse over $100,000 to the California customers that kept on repaying their crypto loans even after trading halted operations on November 10, 2022.
The hearing for the request to refund the customers is scheduled for April 19, 2023. The refunds will go ahead if the motion is accepted by the bankruptcy court.
Meanwhile, BlockFi has agreed to an “interim suspension” of its California Financing Law (CFL) license while “the bankruptcy and revocation actions are pending.”