CALIFORNIA – The California Department of Financial Protection and Innovation (DFPI) announced November 7, that it has revoked crypto lender BlockFi Lending LLC’s California Financing Law (CFL) license. 

BlockFi offered various cryptocurrency services before filing for Chapter 11 bankruptcy in November 2022. The company allowed users to earn interest on crypto holdings, borrow against digital assets, and trade selected cryptocurrencies.

DFPI’s action is a result of an examination and follows a license suspension in November 2022. 

“The Department found that the company violated the CFL by failing to consider borrowers’ ability to repay their loans, charging borrowers interest before the loan proceeds were disbursed, failing to provide consumers with credit counseling, failing to report payment performance to credit bureaus, and failing to accurately disclose annual percentage rates (APRs) in loan disclosure documents,” said DFPI in a statement.

BlockFi will not operate in the future

BlockFi also entered into a settlement agreeing to the license revocation, to desist and refrain from the violations, and to discontinue unsafe or injurious practices.

Under the settlement, BlockFi was fined $175,000 for breaking lending rules. However, the fine was waived because BlockFi is bankrupt, no longer operating, will not operate in the future. The priority is to help customers recover their funds.

BlockFi estate plans to return 100% of eligible claims

BlockFi’s 2022 bankruptcy filing came shortly after the collapse of the cryptocurrency exchange FTX Trading Co. (FTX). In mid-2022, FTX extended a $400 million credit line to BlockFi, aiming to stabilize it amid broader crypto market downturns.

When FTX filed for bankruptcy, BlockFi faced significant losses, ultimately forcing it to declare bankruptcy in November 2022.

According to BlockFi, customers can expect to receive 100% of eligible claims from the BlockFi Estate.

The DFPI expects any person offering securities, lender, or other financial services provider that operates in California to comply with their financial laws. 

Consumers may submit a complaint with the DFPI online (dfpi.ca.gov/submit-a-complaint) or call toll-free at (866) 275-2677.