BlockFi Loses California License Amidst Compliance Failures
Failed to evaluate borrowers' ability to repay loans.
Charged interest before loan disbursement.
Did not offer credit counseling.
Did not report payment performance to credit bureaus.
Did not accurately disclose annual percentage rates (APRs) in loan documents.
BlockFi, which filed for bankruptcy in 2022 following the collapse of FTX, has agreed to the license revocation and committed to halting these unsafe practices. The DFPI imposed a $175,000 fine but waived it due to BlockFi's bankruptcy status and to prioritize consumer recovery.
This action follows a February 2022 consent order issued by the DFPI addressing allegations of BlockFi offering unqualified securities. DFPI Commissioner Clothilde V. Hewlett emphasized the importance of adhering to financial laws to safeguard consumers.
The DFPI continues to oversee financial services in California and urges all financial entities within the state to comply with regulations. Consumers are encouraged to file complaints online or through a toll-free number.
BlockFi Faces Further Challenges
The license revocation is the latest in a series of challenges for BlockFi. 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.