BlockFi nears returning assets following approval from bankruptcy court
Cryptocurrency lender BlockFi’s bankruptcy process has taken a step forward as the company revealed that its disclosure statement received conditional approval from the U.S. Bankruptcy Court in New Jersey.
This development is part of the firm’s strategy to address its financial situation and chart a path forward. Once the bankruptcy plan is given final approval, BlockFi will prioritize its efforts on retrieving funds from its major debtors such as Alameda Research, FTX, Three Arrows Capital, Emergent, Marex, and Core Scientific.
As part of its reorganization strategy, BlockFi aims to recover funds from these entities to address its financial situation and mitigate the impact of its own bankruptcy. However, the now-defunct crypot giants, as well as US regulators, have objected to BlockFi’s bankruptcy plan. Their concerns center around several arguments including that it unfairly downgrades their claims, lacks procedural fairness, and broadly absolves BlockFi and its management from legal responsibility. Over a billion dollars of disputed transactions are at stake.
“BlockFi’s mission through this process has been to maximize recoveries for our creditors, and conditional approval of our disclosure statement moves us one step closer to accomplishing that goal. We are confident that our plan provides the best path to expeditiously return crypto back to our clients and we strongly urge BlockFi’s clients to vote to accept it,” BlockFi’s chief restructuring officer said.
BlockFi also revealed plans to liquidate its cryptocurrency lending platform due to the lack of potential value for its creditors in selling the business to a new owner.
After unsuccessful attempts to find a buyer for its lending platform, BlockFi decided to proceed with the liquidation process. BlockFi’s decision to liquidate the lending platform follows a thorough exploration of alternative options to salvage the business.
The move comes shortly after a New Jersey judge has given the green light for BlockFi wallet holders to re-access their funds that have been frozen on the platform since November.
The decision means that BlockFi’s custodial account holders could receive back nearly $300 million worth of assets, which the judge said it belongs to clients and not part of the company’s estate. However, the ruling will not impact withdrawals or transfers from BlockFi Interest Accounts, which remain paused at this time.
Around $375 million that users attempted to transfer from accounts in which they were paid for lending their crypto back to the company is still locked in BlockFi.