30s Summary

BlockFi, a bankrupt cryptocurrency lender, was stripped of its license in California for disregarding loan repayment ability and inaccurately disclosing loan rates. Additionally, the Department of Financial Protection and Innovation (DFPI) accused the company of charging interest before loan disbursement and lack of customer service. Although slapped with a $175,000 fine, bankruptcy spared them from paying it. Their attempts to recoup through an $875 million deal with the estates of defunct FTX and Alameda Research compounded their woes, leaving them owing around $10 billion to over 100,000 creditors.

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Hey, did you hear the news? California’s Department of Financial Protection and Innovation just permanently stripped BlockFi, the crypto lender, of its license. Remember how they got bankrupt a couple of years ago? Yeah, bad luck just seems to follow them, huh?

The authorities said they had to withdraw the license once they found out that BlockFi had been somewhat of a rule-breaker. They weren’t considering people’s ability to pay back their loans when they lent out money, and even worse, they were charging people interest before giving them their loans. They also weren’t helpful to their customers – couldn’t provide credit counseling or report how well people were repaying their loans to credit bureaus. The cherry on the top? They didn’t tell people the annual rates accurately in the loan documents. Yikes.

As you may guess, the regulator wasn’t happy about it at all. Clothilde Hewlett from DFPI said: “While we encourage innovation in our financial marketplace, companies must comply with laws and protect consumers to continue operating in California.”

Since BlockFi agreed to the revocation, promising to stop unsafe practices and making no more violations, DFPI decided to fine them $175,000. But given the bankrupt state of the company, they didn’t have to pay the fine because the top priority was to refund people who’d taken loans from them.

And just to give you more context, BlockFi had to stop their web platform some months ago. This happened after major upheaval in the crypto world – remember when FTX collapsed in November 2022? Yeah, BlockFi got caught up in it because they were heavily involved with each other.

In their bankruptcy filing, BlockFi revealed a whopping $400 million credit line with FTX US. FTX US was also one of BlockFi’s top unsecured creditors, owing them a cool $275 million loan.

In March 2024, BlockFi managed to broker a deal with the estates of the now-defunct FTX and Alameda Research, worth a grand total of $875 million. Now, with over 100,000 creditors, BlockFi’s owed a massive amount – think somewhere in the realm of $10 billion. Talk about being in a tight spot!