SEC allows BlockFi customers to be repaid before collection of $30.2M fine

The U.S. Securities and Exchange Commission (SEC) will postpone collecting its due fine of $30.2 million from defunct crypto lender BlockFi, it said in a court filing on June 22.

The decision comes as part of an agreement between the SEC and BlockFi, where the agency acknowledged that the repayment of investors should be prioritized over the fine settlement.

In February 2022, BlockFi agreed to pay a fine of $50 million to the SEC for failing to register its lending product. At the time, the lender also agreed to pay another $50 million in fines to settle similar charges in 32 states.

BlockFi, however, filed for bankruptcy in November 2022, soon after the fall of FTX and its sister firm Alameda Research. At the time of bankruptcy, the defunct platform still owed $30.2 million of the $50 million it had agreed to pay the SEC.

In the court filing, the SEC noted that its penalty claim against BlockFi is part of “general unsecured claims.” Therefore, the agency is entitled to participate in the recovery of dues alongside other unsecured creditors.

However, “in order to maximize the amount that may be distributed to investors and avoid delay in such distribution,” the SEC will forego its claim until all BlockFi users are paid back in full.

In March, BlockFi received permission to repay over $100,000 to certain users in California. Last month, a bankruptcy court ruled that BlockFi can return the nearly $300 million sitting in its custodial wallets to users. At the same time, the court said that the $375 million that users tried to move out of the accounts around the time of the bankruptcy filing belong to the estate.

The lender has around $1.2 billion in claims against FTX and Alameda.

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