SEC Holds Off $30M Fine to Aid BlockFi Investors
In a noteworthy development, the U.S. Securities and Exchange Commission (SEC) has chosen to take a backseat regarding the enforcement of a $30 million fine on BlockFi, the crypto lending company which is currently in bankruptcy. According to legal documents from Thursday, the SEC's stance is primarily aimed at ensuring that investors are repaid first.
BlockFi found itself entangled in a $50 million settlement with the SEC due to allegations of non-compliance in registering its crypto lending offerings. While the settlement was agreed upon in February 2022, BlockFi filed for bankruptcy protection in November of the same year in the wake of a major cryptocurrency exchange, FTX, going under.
The SEC has now made a concession to categorize its claim as a part of "general unsecured claims" within the ambit of BlockFi's ongoing Chapter 11 bankruptcy process. This decision was taken to amplify the possibility of disbursing maximum funds to the investors and precluding any delays that might be associated with such a distribution. This was outlined in the agreement inked on June 22.
This comes as a relief for BlockFi's customers, who were earlier faced with an uncertain future regarding repayments. A judge in a New Jersey bankruptcy court in May decreed that customers of BlockFi are eligible for a refund of $300 million that is currently held in custodial wallets on BlockFi’s platform.
Moreover, BlockFi has advanced a restructuring blueprint to the court, which is slated to undergo review in a hearing in July. BlockFi remains optimistic that recovering funds through claims aggregating to $1 billion against the now-defunct crypto entity FTX and its associated trading establishment, Alameda, will be instrumental in recuperating funds for its customers and other creditors.
