The California Department of Financial Protection and Innovation has issued a consent order against a Cayman Islands-based crypto lending company, requiring it to pay a $500,000 penalty. The regulator found the firm operated without a required license and neglected to assess borrowers' repayment ability from 2018 to 2022. The company must now cease violations and transfer customer funds to a licensed entity.
On January 14, the California Department of Financial Protection and Innovation (DFPI) announced a consent order targeting a Cayman Islands-based company that provides crypto-backed loans and related services. The order mandates a $500,000 civil money penalty for multiple violations of state financial laws.
The DFPI's investigation uncovered that between July 26, 2018, and November 22, 2022, the company entered into loan agreements with 5,456 California residents without holding a California Financing Law (CFL) license. This unlicensed activity involved offering both consumer and commercial loans through a program secured by cryptocurrency collateral, including loans in cryptocurrency and fiat currency.
Additionally, during this period, the firm did not evaluate borrowers' ability to repay the loans, breaching requirements under the CFL and the California Consumer Financial Protection Law. Such oversights exposed consumers to potential financial risks in the volatile crypto market.
In response, the DFPI has directed the company to immediately stop and refrain from further violations of these laws and their implementing regulations. The firm is also required to inform all impacted California consumers that their funds will be moved to an entity properly licensed under state law. This action underscores California's ongoing efforts to regulate emerging financial technologies and protect residents from unlicensed lending practices.
