The California Department of Financial Protection and Innovation (DFPI) has permanently revoked the lending license of BlockFi, a crypto lender that declared bankruptcy two years ago.
The California Department of Financial Protection and Innovation (DFPI) has permanently revoked the lending license of BlockFi, a crypto lender that declared bankruptcy two years ago.
The decision, announced on Nov. 7, follows an examination of the company after its license was suspended in November 2022.
BlockFi, which filed for Chapter 11 bankruptcy in November 2022, was found to have violated the California Financing Law (CFL). Regulatory findings indicated that the lender failed to assess borrowers' ability to repay loans and improperly charged interest before disbursing loan proceeds.
Additionally, BlockFi did not provide necessary credit counseling to consumers and neglected to report payment performance to credit bureaus. Inaccurate disclosures of annual percentage rates in loan documents were also cited as violations.
As part of a settlement with the DFPI, BlockFi agreed to cease unsafe lending practices. While a fine of $175,000 was imposed for these violations, the payment was waived to prioritize repayments to consumers, given the company's bankruptcy status.
BlockFi's troubles began in the wake of the collapse of the FTX exchange, with which it had significant financial ties. The company had extended a $400 million credit line to FTX US and listed FTX as one of its top unsecured creditors, with a loan of $275 million.
Earlier this year, BlockFi reached an agreement with the estates of FTX and Alameda Research for $875 million, initiating interim crypto distributions in July 2024.
The revocation of BlockFi’s license comes after the company shut down its web platform in May 2024, preventing clients from accessing their accounts.
The DFPI emphasized the importance of compliance with financial laws to protect consumers in California’s financial marketplace.
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