crypto lender

BlockFi to provide over $100K in refunds to California clients

At least 111 BlockFi borrowers had continued repaying loans between Nov. 11 and Nov. 22, even though they didn’t need to, according to court documents.

Bankrupt crypto lender BlockFi has agreed to refund more than $100,000 to California customers that had continued to repay loans even after a trading halt on Nov. 10 last year. 

In a March 27 statement, California’s Department of Financial Protection and Innovation said that its investigation had discovered that at least 111 borrowers in California made roughly $103,471 in loan repayments between Nov. 11 and Nov. 22.

The financial watchdog claimed that BlockFi failed to “provide timely notification to borrowers that they could stop repaying their BlockFi loans.”

The DFPI claims that borrowers were not notified until Nov. 22 that they could stop repaying their BlockFi Loans “until further notice.”

According to documents, BlockFi requested permission from the bankruptcy court to return these payments to the borrowers in a motion filed with the court on Feb. 24.

The refunds will be able to go ahead if the motion is approved, with a hearing scheduled for April 19.

Excerpt from the DFPI agreement filed in court. Source: DFPI

Meanwhile, the DFPI said BlockFi has agreed to an ”interim suspension” of its California Financing Law (CFL) license while “the bankruptcy and revocation actions are pending.”

“If this motion is granted BlockFi agrees to direct the Servicer to timely return borrowers’ payments, including interest and late fees and all funds paid following the November 10th platform pause,” according to the DFPI documents. 

Unless otherwise ruled by the bankruptcy court, the regulator said BlockFi’s agreement to the interim suspension means it will continue to direct its agents to pause the collection of repayments for California customers on loans, interest payments and “not charge, levy, or assess any late fees associated with any payments, including at maturity.”

BlockFi has also agreed to continue not reporting to credit agencies that loans from California residents have become delinquent or defaulted on or after Nov. 11, and will not take “any action that may harm California residents’ credit scores on such loans.”

Related: BlockFi in no immediate danger, despite Silicon Valley Bank exposure: Report

According to the DFPI, Commissioner Clothilde V. Hewlett suspended BlockFi’s lending license for 30 days on Nov. 11 and moved to revoke BlockFi’s CFL license on Dec. 15,.

BlockFi halted client withdrawals and requested clients not to deposit to BlockFi wallets or Interest Accounts on Nov. 10, citing a lack of clarity around the collapse of FTX.

By Nov. 28, BlockFi filed for Chapter 11 bankruptcy for the company and its eight subsidiaries. BlockFi International filed for bankruptcy with the Supreme Court of Bermuda on the same day.

Novogratz’s Galaxy Digital to acquire Celsius’ GK8 in bankruptcy garage sale

The self-custody platform was acquired by Celsius in 2021 for $115 million and is now set to change hands, pending approvals.

Mike Novogratz-led investment firm Galaxy Digital Holdings has won the bidding to buy GK8, an institutional digital asset self-custody platform owned by Celsius Network — pending court approvals and certain closing conditions.

According to a Dec. 2 blog post from GK8 and a press release from Galaxy, if the acquisition goes ahead, Galaxy will acquire the platform’s nearly 40-strong team as part of the deal including cryptographers and blockchain engineers and an office in Tel Aviv.

GK8 is a self-custody platform for managing blockchain-based assets which offers custody, staking, decentralized finance (DeFi), nonfungible token (NFT) support, tokenization and trading.

The team behind the platform claims it can run secure blockchain transactions without being connected to the internet, severely reducing the risks of hacks.

Celsius acquired GK8 in 2021 for $115 million, though Galaxy has not disclosed how much it offered during the bidding process. 

Mike Novogratz, founder and CEO of Galaxy called the acquisition a “crucial cornerstone in our effort to create a truly full-service financial platform for digital assets.”

“Adding GK8 to our prime offering at this pivotal moment for our industry also highlights our continued willingness to take advantage of strategic opportunities to grow Galaxy in a sustainable manner,” he added.

Galaxy intends to support GK8’s ongoing operations while utilizing its technology to develop its trading platform GalaxyOne it said.

GK8 founders, including CEO Lior Lamesh and chief technology officer Shahar Shamai, are expected to stay with the company and lead Galaxy’s new custodial business.

“With the backing of Galaxy, we aim to introduce new and exciting offerings to the industry that showcase a combination of Galaxy’s best-in-class services and GK8’s cryptography, security, and unparalleled R&D skills,” Lamesh said.

Related: Mike Novogratz: Bankman-Fried is ‘delusional’ and headed to jail

Celsius has been undergoing bankruptcy proceedings since filing for Chapter 11 bankruptcy protection on Jul. 13, discussing plans to sell some of its assets.

In the court filing, Celsius CEO Alex Mashinsky indicated the company could sell Bitcoin (BTC) mined by its mining operation to help repay at least one of its loans and provide revenue for the company in the future.

While in a Sept. 15 filing with the United States Bankruptcy Court for the Southern District of New York, Celsius asked for permission to sell its stablecoin holdings.

Galaxy Digital was recently named in a $100 million lawsuit by institutional crypto custodian service and wallet operator BitGo for dropping its plans to acquire the firm. 

Galaxy terminated the May 2021 agreement to acquire the firm on Aug. 15, 2022, citing a breach of contract by BitGo when it allegedly failed to deliver audited financial statements by July 31, 2022. 

BitGo then revealed in Sept. 13 post that it was seeking more than $100 million in damages, accusing Galaxy of “improper repudiation” and “intentional breach” of its acquisition agreement with BitGo.