SEC postpones $30 million BlockFi penalty to boost creditor repayments

Quick Take

  • The SEC agreed to delay recovery of BlockFi’s $30 million fine in an effort to put creditors first in line for reimbursement.

The SEC has agreed to defer payment of a $30 million fine from bankrupt crypto lender BlockFi until creditors are reimbursed, according to a court filing.

The bankrupt crypto lender still needs to settle the remaining sum of $30 million left over from a $50 million penalty owed to the US Securities Exchange Commission (SEC) in relation to charges of failing to register for the offering and sale of its lending products.

However, according to an agreement reached on Thursday, the SEC has now agreed to postpone repayment of the fine, "in order to maximize the amount that may be distributed to investors and avoid delay in such distribution."

BlockFi agreed to settle the fine in February 2022, but after filing for bankruptcy in the wake of the FTX collapse, it suggested that the money owed to the SEC should be paid after other debts.

The SEC initially disagreed with this, saying that they should be paid at the same time as other creditors, but Thursday's court decisions now means the regulator will wait to collect its $30 million. 

In May, a judge in New Jersey said that BlockFi's customers can get back $300 million stored in custodial wallets on the platform.

The lender's bankruptcy estate has formulated a reorganization plan that will be presented in court in July. The bankrupt crypto-lender has said the return of clients' and creditors' funds largely depends on the success of its lawsuits against former commercial partners FTX and Alameda, potentially affecting over $1 billion in recoveries.

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