The U.S. Securities and Exchange Commission (SEC) has agreed to forgo a $30 million fine from bankrupt crypto lender BlockFi until after investors are repaid, a court filing from Thursday shows.
The sum is what's left over from a $50 million penalty owed to the SEC by BlockFi to settle charges of failing to register with the regulator for the offering and sale of its crypto lending product. The platform agreed to the settlement in February 2022 but filed for bankruptcy in November following the collapse of crypto exchange FTX.
The regulator asserted its claims should be counted as part of "general unsecured claims" in the ongoing Chapter 11 bankruptcy proceedings, but 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 likely among the first creditors in line to receive payment from BlockFi, Sasha Hodder, founder of Hodder Law, a firm that specializes in crypto law, told CoinDesk in November.
“The customers are really at the bottom of the list here,” Hodder said at the time.
In May, a New Jersey bankruptcy court judge said BlockFi customers can be repaid $300 million in funds held in custodial wallets on the platform. While the bankrupt estate has presented a reorganization plan to the court due for a hearing in July, BlockFi has said $1 billion in claims against fallen crypto enterprise FTX and its sister trading firm Alameda will be the "largest driver" of fund recoveries for customers and creditors.
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