Why is BlockFi repaying over $100,000 to California clients?

News Desk5
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BlockFi continued taking payments of up to $103,471 from at least 111 California borrowers through its servicer.

Bankrupt crypto lender BlockFi has accepted to pay back a total of $103,471 in refunds to its California-based clients. The new development was shared via a Monday announcement by California’s Department of Financial Protection and Innovation (DFPI). According to the DFPI, BlockFi will make the refunds through its servicer.

BlockFi Found Guilty of Failing to Notify Clients to Stop Repaying Loans

The decision comes as a result of a DFPI investigation, which found that BlockFi failed to notify its clients in good time that they could stop repaying their loans. At that time, the platform had already frozen withdrawals. The DFPI investigation found that BlockFi continued taking payments of up to $103,471 from at least 111 California borrowers through its servicer. The unsuspecting borrowers continued to repay loans between November 11 and 22, even when they didn’t have to. And it wasn’t until November 22, that the crypto lender officially announced that borrowers could stop repaying loans “until further notice”.

Following the conclusion of the DFPI investigation, BlockFi has now approved the request to distribute the refunds to the affected former clients. However, the decision will be subject to the approval of the bankruptcy court. Part of the DFPI document reads:

“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.”

BlockFi took a serious hit following the collapse of the FTX exchange last November. The exposure caused it to suspend client withdrawals and deposits to wallets and interest accounts on November 11, 2022. And barely two weeks later, BlockFi eventually filed for Chapter 11 bankruptcy protection for itself and its eight subsidiaries. BlockFi International also filed for bankruptcy with the Supreme Court of Bermuda on the same day.

In line with the refund request, a hearing is scheduled to take place on April 19, per the DFPI announcement.

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