According to a court document filed recently the U.S. Securities and Exchange Commission (SEC) has consented to postpone collecting a $30 million fine from the insolvent crypto lender BlockFi until investors have been paid back.
The amount is what’s left over from a $50 million fine BlockFi paid to the SEC to resolve allegations that it failed to register with the authority for the offering and sale of its crypto loan product. Following the failure of cryptocurrency exchange FTX, the platform signed the settlement agreement in February 2022 but declared bankruptcy in November.
The regulator argued that its claims should be included among the “general unsecured claims” in the current Chapter 11 bankruptcy proceedings; however, the regulator agreed to forego the payment “in order to maximize the amount that may be distributed to investors and avoid delay in such distribution,” according to the agreement reached on June 22.
The SEC was probably one of BlockFi’s first debtors to get payment, according to Sasha Hodder, founder of the crypto law firm Hodder Law.
At the time, Hodder said that “the customers are really at the bottom of the list here.”
A bankruptcy judge in New Jersey ruled in May that $300 million in funds held in custodial wallets on the BlockFi network might be returned to clients. While the bankrupt estate has submitted a restructuring plan to the court for a hearing in July, BlockFi has stated that $1 billion in claims against the defunct cryptocurrency company FTX and its sister trading firm Alameda will be the “largest driver” of fund recoveries for users and creditors.