The United States Securities and Exchange Commission (SEC) has agreed to postpone the payment of a $30 million fine from bankrupt cryptocurrency lender BlockFi until all creditors are paid back. The $30 million fine represents the balance of a $50 million settlement that BlockFi reached with the SEC in February 2022 over its failure to register high-yield interest accounts as securities.
According to court documents filed on June 22, the SEC will forgo the amount owed by BlockFi to “maximize” and avoid delays in funds’ distribution to investors “until payment in full of all other Allowed Claims.” The SEC was at the top of BlockFi creditor’s list along with West Realm Shires Services Inc., which does business as FTX US.
BlockFi filed for Chapter 11 bankruptcy protection in November 2021 after it faced questions about its financial health following the FTX crisis. On May 11, a federal judge granted BlockFi permission to return $297 million to customers with deposits held in its Wallet program. However, customers who used BlockFi Interest Accounts (BIA) in its lending business, which hold over $375 million, are considered property of the bankruptcy estates.
In addition to the SEC fine, BlockFi has also agreed to pay $50 million to 32 U.S. states filing similar complaints. It will also refund more than $100,000 to California customers who continued to repay loans even after the company halted trading on Nov. 10 last year.
The delay in the SEC fine payment until all creditors are paid back is expected to help facilitate faster distribution of funds to investors.