The California Department of Financial Protection and Innovation (DFPI) has permanently revoked the license of bankrupt cryptocurrency lender BlockFi after two years.

DFPI said in a statement on November 7 that this license revocation was the result of a review conducted after the regulator suspended BlockFi’s license in November 2022.

While BlockFi accepted the license revocation in this process, it also signed an agreement to end its own unsafe practices and avoid erroneous transactions. After finding that BlockFi violated the California Financing Law (CFL), DFPI decided to completely revoke its license, which was suspended two years ago.

Under this law, BlockFi admitted that they made loans without considering the borrowers’ loan repayment capacity and collected interest before the loan amounts were distributed to borrowers.

Another violation by the crypto lending platform was that it did not provide credit counseling to consumers and failed to report payment performance to credit bureaus. DFPI also stated that BlockFi did not accurately disclose annual interest rates in its loan agreement documents.

Following all these violations, DFPI imposed a $175,000 penalty on BlockFi. However, since BlockFi was a bankrupt and no longer operating company, payment of this penalty was waived and priority was given to consumer refunds.

“While we encourage innovation in our financial market, companies must be able to continue operating in California because they must comply with the law and protect consumers,” DFPI Commissioner Clothilde Hewlett said in a statement regarding this process.

This statement draws attention to how important regulations and consumer protection measures are.

The revocation of BlockFi’s license comes just a few months after the company ceased operations. After the company’s web platform closes in May 2024, users can no longer access the platform.

This situation further deepened the collapse of BlockFi and revealed the difficulties experienced by the company and its customers.

BlockFi’s bankruptcy process began with the collapse of Sam Bankman-Fried’s FTX in November 2022. There was a significant financial tie between FTX and BlockFi, and both companies had significant exposure to each other.

In its bankruptcy filing, BlockFi disclosed its relationships with FTX and the resulting financial difficulties it experienced. BlockFi, which provided a $400 million credit line to FTX US in July 2022, has become one of FTX US’s largest unsecured creditors with this debt.

After filing for bankruptcy, BlockFi made an agreement worth $875 million with the heirs of FTX and Alameda Research. This agreement was an important step taken by BlockFi to recover from the post-bankruptcy situation. Additionally, the crypto lender began its first temporary crypto distributions through Coinbase in July 2024.

As of April 2023, BlockFi’s total debts had risen to $10 billion, involving more than 100,000 creditors. BlockFi’s bankruptcy process and subsequent regulatory steps once again reveal the importance of financial responsibilities and regulations in the cryptocurrency industry.