BlockFi sues state commission for refusing to accept surrendered license.

BlockFi has been unsuccessful in returning its Connecticut money transmitter license, as the state regulator has continuously refused to respond. Instead of accepting the license return, the commission is requiring BlockFi to go through administrative processes that would involve court proceedings or payment of a fine.

BlockFi filed for bankruptcy last year after the FTX crash and owed debts to over 100,000 creditors, with the 50 largest creditors accounting for $1.3 billion. As part of the bankruptcy, BlockFi needed to surrender its Connecticut money transmitter license, which allowed it to transfer funds within the state. The license was no longer necessary because the company had ceased operations.

The State Commission’s Lack of Response to BlockFi’s Request for License Return

In December 2022, BlockFi attempted to return the license but received no response from the commission. In February, the state revoked the license and ordered BlockFi to stop doing business within the state. This was surprising to BlockFi, as it had already attempted to return the license and had halted all operations during the bankruptcy process.

BlockFi made a subsequent attempt to return the license but received no response. Instead, the commission informed the company that it would need to pay a $1 million fine to avoid court proceedings.

BlockFi sued the Connecticut banking commissioner due to concerns about the situation. Despite receiving approval to sell its assets earlier this year, the company is burdened with significant debt. It aims to settle with its clients instead of engaging in a lengthy court case or paying unwarranted fees.

In its statement, BlockFi emphasized that:

“The Department’s self-help actions to revoke the license and assess monetary penalties are in pursuit of its pecuniary interest and do not seek to protect public health, safety, or welfare.”

BlockFi is trying to stop the court proceedings and make it clear that the state is wrong and violating the law by revoking its license and seeking civil penalties.

A court proceeding is scheduled for July 6, during which BlockFi can present arguments in support of its position and potentially avoid the administrative hearing scheduled for July 20. The outcome of the July 6 court process may determine whether the July 20 court meeting proceeds or not.

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