SEC will ‘forego’ $30M BlockFi penalty until investors are repaid

BlockFi is set to open customer withdrawals later this summer


rafapress/Shutterstock modified by Blockworks


Bankrupt crypto lender BlockFi has reached an agreement with the SEC. As part of the deal, the company will utilize approximately $30 million in penalties owed to the SEC to prioritize repayment to its investors. The agreement was finalized on Thursday.

“In order to maximize the amount that may be distributed to investors and avoid delay in such distribution, the Commission has agreed to forego participating in any distributions under the Plan or requiring any cash reserve in connection with such distributions, on account of any claims that may be or become Allowed Claims based on the Commission POC until all other allowed claims…are paid in full,” the SEC said in the filing

The SEC initially charged BlockFi a $50 million penalty back in February of last year, claiming that BlockFi sold BlockFi Interest Accounts (BIAs) to the public.

“Through BIAs, investors lent crypto assets to BlockFi in exchange for the company’s promise to provide a variable monthly interest payment,” the SEC said in its press release. 

“The order finds that BIAs are securities under applicable law, and the company therefore was required to register its offers and sales of BIAs but failed to do so or to qualify for an exemption from SEC registration.”

BlockFi is set to open to customer withdrawals later this summer according to emails sent to customers earlier this month.

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In early May, a judge ruled that roughly $300 million can be returned to customers who held crypto in custodial accounts, but that the $375 million locked up in interest-bearing accounts will not be returned to the original customers.

Following the collapse of FTX, the crypto lender halted withdrawals before filing for bankruptcy in late November of last year.

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