Français
Português
Indonesia
Tagalog
Malaysia
हिन्दी
বাংলা
中文 (中国)
Tiếng Việt
The California Department of Financial Protection and Innovation (DFPI) has permanently revoked the lending license of BlockFi, a crypto lending platform, following a series of financial troubles that led to its bankruptcy and significant regulatory issues. BlockFi’s collapse in 2022 came in the wake of the FTX exchange’s downfall, which created a ripple effect throughout the cryptocurrency market. At the time of its collapse, BlockFi had extended a $400 million credit line to FTX, which was a major factor contributing to BlockFi’s financial instability. The bankruptcy of FTX and its associated market fallout ultimately pushed BlockFi into its own bankruptcy filing later in 2022.
The DFPI issued the license revocation after an investigation into BlockFi’s operations found several violations of California’s Financing Law. Specifically, BlockFi was found to have failed to properly assess the ability of borrowers to repay their loans before extending credit. In addition, the platform was accused of charging interest before loans were even issued, which is against state lending regulations. Furthermore, BlockFi was found to have misrepresented key loan terms, which impacted borrowers’ ability to manage their loans and potentially harmed their credit scores.
BlockFi also faced issues related to its lack of required credit counseling for borrowers, which further violated state consumer protection laws. These findings led the DFPI to conclude that the platform’s practices were unsafe for borrowers and contrary to regulatory standards.
In addition to revoking BlockFi’s lending license, the DFPI and BlockFi reached a settlement agreement. As part of the settlement, BlockFi agreed to cease its unsafe lending practices and to implement corrective measures. While a $175,000 fine was levied against the company for these violations, the payment of the fine has been waived. Instead, the funds will be redirected to repaying creditors who were affected by the company’s collapse.
This action from the DFPI highlights the growing scrutiny of the crypto lending industry, particularly following the high-profile failures of platforms like BlockFi and FTX. The regulatory actions taken against BlockFi serve as a reminder of the risks and regulatory challenges that crypto companies face, especially when dealing with customer funds and lending practices.
