Bankrupt crypto lender BlockFi has agreed to refund more than $100,000 to California customers that had continued to repay loans even after a trading halt on Nov. 10 last year.
According to a March 27 statement from California's financial watchdog, the Department of Financial Protection and Innovation (DFPI), its investigation discovered at least 111 borrowers in California paid back roughly $103,471 in loan repayments between Nov. 11 and Nov. 22.
The regulator claimed that BlockFi failed to "provide timely notification to borrowers that they could stop repaying their BlockFi loans."
The DFPI claims that borrowers were not notified until Nov. 22 that they could stop repaying their BlockFi Loans "until further notice. According to documents, BlockFi requested permission from the bankruptcy court to return these payments to the borrowers in a motion filed with the court on Feb. 24, 2023.
The refunds will be able to go ahead if the motion is approved, with a hearing scheduled for April 19. Meanwhile, BlockFi has agreed to a "interim suspension" of its California Financing Law (CFL) license while "the bankruptcy and revocation actions are pending," according to the DFPI.
According to the DFPI documents, "if this motion is granted, BlockFi agrees to direct the Servicer to timely return borrowers' payments, including interest and late fees, and all funds paid following the November 10th platform pause."
The regulator stated that BlockFi's agreement to the interim suspension means it will continue to direct its agents to pause the collection of repayments for California customers on loans, interest payments, and "not charge, levy, or assess any late fees associated with any payments, including at maturity," unless otherwise ruled by the bankruptcy court.
BlockFi has also agreed to continue not reporting to credit agencies that loans from California residents have become delinquent or defaulted on or after Nov. 11, 2022, and to refrain from taking "any action that may harm California residents' credit scores on such loans."
According to the DFPI, Commissioner Clothilde V. Hewlett previously suspended BlockFi's lending license for 30 days beginning on Nov. 11, 2022 and moved to revoke BlockFi's CFL license on Dec. 15, 2022.
BlockFi halted client withdrawals and requested clients not to deposit to BlockFi wallets or Interest Accounts on Nov. 10, citing a lack of clarity around the FTX collapse.