Bankrupt cryptocurrency lender BlockFi has sued Connecticut Banking Commissioner Jorge Perez in the U.S. Bankruptcy Court of New Jersey.
This comes after the state regulator has repeatedly refused to accept BlockFi’s offer to surrender its Connecticut money transmitter license, which it has had since April 2020. Instead, the regulator has been insisting on an administrative proceeding—which means the company would need to represent itself in yet another court proceeding.
The company was one of many that felt the sting of the FTX collapse late last year. Its creditor committee revealed a $1.2 billion exposure to the exchange and its venture capital arm, Alameda Research. BlockFi also announced $227 million in deposits, which were not FDIC-insured, were being held at now-defunct Silicon Valley Bank.

BlockFi Creditor Committee Advisor Reveals $1.2B Exposure to FTX, Alameda Research
The now-bankrupt crypto lending firm BlockFi has reportedly more than $1.2 billion in assets linked to FTX and Alameda Research, the two companies founded by the fallen crypto mogul Sam Bankman-Fried. This is according to unredacted filings assembled and uploaded by M3 Partners, an advisor to BlockFi’s creditor committee, CNBC reported Tuesday. Per the financial presentation, as of January 14, BlockFi had $415.9 million worth of assets tied up with FTX and $831.3 million in loans to its sister c...
After BlockFi filed for Chapter 11 bankruptcy protection in November, it was notified it would need to surrender its Connecticut money transmitter license. It tried to do so in December. The regulator never responded.
Instead, in February 2023, it sent the company a notice that its Connecticut money transmitter license was being revoked and it was being ordered to cease and desist doing business with the state’s residents. Never mind the fact that by the time the Connecticut Department of Banking issued its notice, the issue was moot. BlockFi halted all operations when it filed for bankruptcy in November.
Once it received the notices, the crypto exchange tried to avoid being pulled into another court proceeding by again offering to surrender its money transmitter license. Since March, one of BlockFi’s lawyers has had several calls with a Connecticut banking department staff attorney and been told the company would need to pay a $1 million fine if it wanted to avoid a court proceeding.

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The FTX contagion has just claimed another crypto firm. BlockFi will file for Chapter 11 bankruptcy protection later today, a source at the company tells Decrypt. In an official announcement, the New Jersey-based company said it "will focus on recovering all obligations owed to BlockFi," but that "recoveries from FTX will be delayed" due to the ongoing bankruptcy proceedings at the fallen crypto exchange. The crypto lender is also laying off a large portion of its staff, the source said. BlockF...
That’s raised a few concerns, according to BlockFi.
According to its lawsuit against the Connecticut banking commissioner, BlockFi now needs to retain Connecticut council experienced in lawsuits dealing with the banking department. The company has stated this will come at “significant expense to the estate” in addition to any time and other resources the directors will require to address the court case.
BlockFi currently owes $1 billion to its three largest creditors, not to mention the thousands of smaller, retail investors waiting to withdraw their funds. It was granted an approval earlier this year to sell its remaining assets in an effort to start making clients whole again.

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Defunct crypto lender BlockFi has earned court approval to sell its remaining assets. BlockFi, which let users earn interest on their deposited cryptocurrencies, fell into bankruptcy in late November 2022 due to its connection with FTX, which had previously extended the firm several lines of credit. These included a $250 million line of credit in June 2022, earmarked to “bolster its balance sheet.” As per a new filing made in a New Jersey Bankruptcy Court on January 30, potential suitors will...
Why then would the government insist on dragging the crypto exchange into a costly and lengthy court case over a license it has said it won’t fight to keep?
“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 said in its complaint.
The lawsuit said the cryptocurrency company has two goals: First, it seeks to pause the court proceedings, setting a date to create a restructuring plan; and second, prove the department violated Section 525 by revoking BlockFi’s license and pursuing civil penalties.
A summons has already been sent to Perez and BlockFi will argue in favor of its motion to avoid the court proceeding on July 6. But for now, the administrative proceeding that the bankrupt crypto exchange has been trying to avoid is still scheduled to begin on July 20.