US SEC Will Defer BlockFi’s $30M Fine Until Investors Are Repaid

The agency thinks that the decision will make it faster for users of the bankrupt lender to pay back their loans.

The US Securities and Exchange Commission (SEC) has given up its spot as one of the first creditors to be paid back by the bankrupt crypto lending site BlockFi.

The SEC is already under a lot of heat from a court case against Binance, a cryptocurrency exchange.

U.S. SEC Forfeits Front-Row Seat for Investors

Early last year, the U.S. SEC fined BlockFi $100 million for not registering its crypto lending goods with the agency. BlockFi agreed to pay the fine.

But in November, after the collapse of the crypto derivatives market FTX, BlockFi filed for Chapter 11 bankruptcy protection. When it ran out of money, the platform had between $1 billion and $10 billion in user cash. So, the lending company could not pay the SEC the $30 million settlement it had agreed to.

During BlockFi’s bankruptcy case, the Securities and Exchange Commission was listed as one of the first creditors to be paid by the company after it restructured.

But, according to a court statement on Thursday, the SEC has lost its front-row seat as an early creditor of the lender. The regulator said that its claims should be put into the category of “general unsecured claims” in the bankruptcy processes that are going on right now.

BlockFi’s Reimbursement Strategy

Last week, the struggling company that lends out crypto talked to its users about how to get their assets back. Before users can start making payments, the company said it would add new features to the BlockFi Wallet.

The crypto lender also said that the withdrawal process would be sped up by letting qualified users withdraw in batches. To help with the transfer process, third-party wallets will be needed. BlockFi also said that the process of withdrawing funds will happen this summer.