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

March 28, 2023 Coin Telegraph

Blockfi

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.

According to a March 27 statement from California's financial watchdog, the Department of Financial Protection and Innovation (DFPI), its investigation discovered at least 111 borrowers in California paid back roughly $103,471 in loan repayments between Nov. 11 and Nov. 22.

The regulator claimed that BlockFi failed to "provide timely notification to borrowers that they could stop repaying their BlockFi loans."

Californian @BlockFi users: BlockFi to refund over $100k after failing to notify borrowers about halting repayments post-FTX crash. The motion was filed, with a hearing set for April 19, 2023. Updates to follow. More info: https://t.co/bJkiyfgA1b #FTX #BlockFi #CryptoRefund pic.twitter.com/u0QpwY6oou
— CA Department of Financial Protection & Innovation (@CaliforniaDFPI) March 27, 2023

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, 2023.

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, 2022, and will not take “any action that may harm California residents’ credit scores on such loans.”

According to the DFPI, Commissioner Clothilde V. Hewlett previously suspended BlockFi's lending license for 30 days beginning on Nov. 11, 2022 and moved to revoke BlockFi's CFL license on Dec. 15, 2022.

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 FTX collapse.

Today, BlockFi filed voluntary cases under Chapter 11 of the U.S. Bankruptcy Code.https://t.co/adaAx6me4r
— BlockFi (@BlockFi) November 28, 2022

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.

Crypto firms could face 2 years jail for breaching UK advertising laws

February 7, 2023 Coin Telegraph

Coin Telegraph

Crypto firms in the United Kingdom could face some harsh punishments under the FCA's proposed financial promotions regime.

Newly proposed advertising rules in the United Kingdom could potentially see executives of crypto firms face up to two years of prison for failing to meet certain requirements around promotion, according to the U.K. financial watchdog.

In a Feb. 6 statement, the U.K. Financial Conduct Authority (FCA) revealed that if the proposed "Financial promotions regime" is approved by Parliament, all crypto firms in the country and overseas would have to follow certain requirements when advertising their crypto services to U.K. customers.

“Cryptoasset businesses marketing to UK consumers, including firms based overseas, must get ready for this regime,” said the FCA.

"Acting now will help ensure they can continue to legally promote to U.K. consumers. We encourage firms to take all necessary advice as part of their preparations," it added.

Under the FCA's proposed regime, crypto firms would need to either have authorization from the FCA to advertise their services or have an exemption under the Financial Promotion Order.

According to the regulator, there are only four routes in which a "cryptoasset business" can promote its services to customers in the United Kingdom:

The promotion is communicated by an FCA-authorised person.
The promotion is made by an unauthorized person but approved by an FCA-authorized person. Legislation is currently making its way through Parliament which, if made, would introduce a regulatory gateway that authorized firms will need to pass through in order to approve financial promotions for unauthorized persons.
The promotion is communicated by a cryptoasset business registered under the MLRs with the FCA.
The promotion otherwise complies with the conditions of an exemption in the Financial Promotion Order.

The regulator said that any promotion made outside of these routes will be in breach of the Financial Services and Markets Act 2000 (FSMA), which carries a criminal punishment of up to two years of imprisonment.

"We will take robust action where we see firms promoting cryptoassets to UK consumers in breach of the requirements of the financial promotions regime," the FCA said.

Other than potential prison time for its execs, firms caught violating the new regime could face having their website taken down, public warnings, and other enforcement actions.

At this stage, the FCA has said they will await the "relevant legislation" to publish "our final rules for crypto asset promotions," possibly indicating the financial promotions regime could see updates or changes.

"Subject to any changes in circumstances, we expect to take a consistent approach to crypto assets to that taken in our new rules, in place from Feb. 1 2023, for other high-risk investments," the FCA said.

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Countries ignoring crypto AML rules risk placement on FATF’s ‘grey list’ — Report

November 8, 2022 Coin Telegraph

anti-money laundering

Reports suggest the Financial Action Task Force will conduct annual checks to ensure countries are enforcing anti-money laundering rules for crypto providers.

Countries failing to adhere to anti-money laundering (AML) guidelines for cryptocurrencies could find themselves added to the Financial Action Task Force’s (FATF's) “grey list."

According to a Nov. 7 report from Al Jazeera, sources say the global financial watchdog is planning to conduct annual checks to ensure countries are enforcing AML and counter-terrorist financing (CTF) rules on crypto providers.

The grey list refers to the list of countries the FATF deems as “Jurisdictions under Increased Monitoring."

The FATF says countries on this list have committed to resolving "strategic deficiencies" within agreed timeframes and are thus subject to increased monitoring.

It differs from the FATF "blacklist," which refers to countries with "significant strategic deficiencies in relation to money laundering", a list which includes Iran and the Democratic People's Republic of Korea.

At the moment, there are 23 countries on the grey list, including Syria, South Sudan, Haiti and Uganda.

Crypto hotspots like the United Arab Emirates (UAE) and the Philippines are on the grey list as well, but according to FATF, both countries have made a "high-level political commitment” to work with the global financial watchdog to strengthen their AML and CFT regime.

Pakistan was previously also on the list, but after taking 34 actions to solve FATF’s concerns, they are no longer subject to increased monitoring.

One of the anonymous sources cited by Al Jazeera noted that while failure to comply with crypto AML guidelines won’t automatically put a country on the FATF’s grey list, it could affect its overall rating, tipping some to fall into increased monitoring.

Cointelegraph has reached out to the Financial Action Task Force for comment but has not received a response at the time of publication.

In April 2022, the AML watchdog reported that many countries, including those with virtual asset service providers (VASPs), are not in compliance with its standards on Combating the Financing of Terrorism (CFT) and Anti-Money Laundering (AML).

Under FATF guidelines, VASPs operating within certain jurisdictions need to be licensed or registered.

In March, it found that several countries had “strategic deficiencies” in regard to AML and CTF, including the United Arab Emirates, Malta, the Cayman Islands and the Philippines.

In October, Svetlana Martynova, the Countering Financing of Terrorism Coordinator at the United Nations (UN) noted that cash and hawala have been the “predominant methods” of terror financing.

However, Martynova also highlighted that technologies such as cryptocurrencies have been used to “create opportunites for abuse.”

“If they’re excluded from the formal financial system and they want to purchase or invest in something with anonymity, and they’re advanced for that, they’re likely to abuse cryptocurrencies,” she said during a “Special Meeting” of the UN on Oct. 28.

financial watchdog