The California Department of Financial Protection and Innovation (DFPI) has taken decisive action against BlockFi Lending LLC by revoking its California Financing Law license. This move comes in response to multiple violations identified by the regulatory body.
What Happened: The regulatory agency announced its decision on Thursday.
The DFPI’s investigation uncovered several compliance failures by BlockFi. The crypto lender did not evaluate borrowers’ ability to repay loans and charged interest before loan disbursement.
The DFPI indicated that BlockFi also failed to offer credit counseling, report payment performance to credit bureaus and accurately disclose annual percentage rates (APRs) in its loan documents.
BlockFi, which filed for bankruptcy in 2022 following the collapse of FTX, has agreed to the license revocation and committed to halting unsafe practices.
Benzinga has contacted BlockFi's claims agent, Kroll, for comment.
The DFPI imposed a $175,000 fine for these violations but waived it to prioritize consumer recovery due to BlockFi’s bankruptcy status.
In February 2022, a consent order was issued by the DFPI to address allegations of BlockFi offering unqualified securities. DFPI Commissioner Clothilde V. Hewlett stressed the importance of adhering to financial laws to safeguard consumers.
The DFPI continues its regulatory oversight of financial services in California, urging all financial entities within the state to comply with regulations. Consumers are encouraged to file complaints online or through a toll-free number.
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Why It Matters: The revocation of BlockFi’s license by the DFPI is the latest development in a series of challenges faced by the crypto lender.
In 2023, a New Jersey Bankruptcy Judge ruled that nearly $300 million held in custodial wallets should be returned to BlockFi clients, emphasizing that these assets belong to the customers and not the bankrupt lender’s estate.
An additional $375 million that clients attempted to withdraw from BlockFi’s interest-bearing accounts remains unpaid due to the company’s financial troubles following the FTX collapse.
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