SEC Temporarily Suspends $30M BlockFi Penalty, Investors to Recover $300M

• The U.S. Securities and Exchange Commission (SEC) has temporarily suspended a $30 million penalty against crypto lender BlockFi, pending investor repayment.
• This decision is part of the SEC’s agreement to be included as part of the „general unsecured claims“ in BlockFi’s Chapter 11 bankruptcy proceedings.
• Investors will also be able to recover $300 million from custodial wallets, per a ruling by a New Jersey bankruptcy court judge.

SEC Temporarily Suspends BlockFi Penalty

The U.S. Securities and Exchange Commission (SEC) has displayed an unusual act of financial mercy by agreeing to wait to collect its hefty $30 million fine from crypto lender BlockFi, currently grappling with bankruptcy. This decision was captured in a court filing from Thursday and is designed to ensure that BlockFi’s investors are repaid before the regulator collects its due.

Fines Reduced From $50M To $30M

The saga began with BlockFi facing an imposing $50 million penalty from the SEC for failing to register its crypto lending product back in February 2022. The subsequent filing for bankruptcy in November – after the devastating collapse of the crypto exchange FTX – reduced this penalty down to an IOU of $30 million payable to the SEC.

Prioritizing Investor Returns Over Regulatory Fines

In order to prioritize investor returns and streamline distribution, the regulator has agreed that its claims should be part of the “general unsecured claims” in current Chapter 11 bankruptcy proceedings instead of collecting their due immediately at front of creditor queue like they usually do it.

Recovering Funds From Custodial Wallets

In another positive development for BlockFi’s investors, a New Jersey bankruptcy court judge ruled that customers could recoup $300 million held in custodial wallets back in May this year making it easier for investors who suffered losses due to mismanagement or fraud perpetrated by leaders at BlockFI or FTX Exchange can get back their funds without much hassle and delay now .


BlockFi’s investors have been given a rare opportunity at regaining some lost funds through these recent rulings by both SEC and NJ Bankruptcy Court Judge which should hopefully help them recover some capital quickly and fairly without any further complications or delays from authorities