SEC To BlockFi In $50 Million Settlement Saga – Pay Debtors First

The U.S. Securities and Exchange Commission (SEC) has directed bankrupt crypto lender BlockFi to prioritize its obligation to repay customers over its outstanding $30 million fine to the securities watchdog, court documents filed on Thursday revealed.

BlockFi Fined For Securities Violations

In February 2022, the SEC fined BlockFi $50 million in penalties for offering unregistered securities services to American investors. At the same time, regulators from 32 states also accused the company of violating securities laws and issued fines amounting to $50 million.

On Thursday, the SEC filed to delay the remaining $30,284,696 fine ” in order to maximize the amount that may be distributed to investors and avoid delay in such distribution.” It’s currently unclear if state regulators will follow the SEC’s footsteps or if they will demand their respective fines regardless.

The crypto lender filed for bankruptcy months later in November after Sam Bankman-Fried’s FTX imploded the very same month. BlockFi reported a balance sheet hole greater than $1 billion in the bankruptcy filing. The lender owes over 100,000 creditors with liabilities as much as $10 billion.

A court approval in January 2023 allowed the lender to begin selling off its remaining assets to create liquidity for the money owed to creditors and regulators alike. In May, the company decided to liquidate its crypto lending business after unsuccessful attempts at securing fresh cash injections from new investors.

A New Jersey judge also ruled that users with funds in BlockFi custodial accounts could receive up to $300 million in repayment.

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