California Revokes BlockFi’s Lending License Post-Bankruptcy 🚫💸
The California Department of Financial Protection and Innovation (DFPI) has officially revoked the lending license of BlockFi, a now-defunct cryptocurrency lender, two years after its bankruptcy declaration. BlockFi agreed to a settlement to relinquish its license and cease unsafe practices.
Key Points:
• License Revocation: The DFPI permanently revoked BlockFi’s license after a detailed examination following the suspension of its license in November 2022.
• CFL Violations: BlockFi was found to have breached the California Financing Law (CFL) by not evaluating borrowers’ repayment ability, charging interest before disbursing loan funds, failing to offer credit counseling, and inaccurately disclosing annual percentage rates.
• Consumer Protection: The DFPI imposed a $175,000 fine, which was waived to prioritize repayments to consumers due to BlockFi’s bankruptcy status.
• Shut Down in 2024: BlockFi terminated its web platform in May 2024, preventing clients from accessing the platform.
Background:
BlockFi’s financial troubles deepened following the collapse of FTX in November 2022, due to significant financial ties between the two. BlockFi had extended a $400 million credit line to FTX US and listed it as one of its largest unsecured creditors with a $275 million loan.
DFPI Commissioner Clothilde Hewlett emphasized:
“While we encourage innovation in our financial marketplace, companies must comply with laws and protect consumers to continue operating in California.”
This case serves as a stark reminder of the importance of compliance and consumer protection within the crypto industry.
