BlockFi opens withdrawals for wallets users
BlockFi has exited bankruptcy and is set to begin returning cryptocurrency assets to its wallet clients. The development comes roughly a year after the crypto lender faced financial challenges due to the collapse of FTX.
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.
Based in Jersey City, New Jersey, BlockFi’s next move is to chase additional payments via the bankruptcy proceedings of other crypto businesses. The company will prioritize its efforts on retrieving funds from its major debtors such as Alameda Research, FTX, Three Arrows Capital, Emergent, Marex, and Core Scientific.
The firm provided an estimation in its court filings, stating that customers with interest-bearing “Earn” accounts could recover between 39.4% to 100% of their account values.
One of the key factors leading to BlockFi’s bankruptcy in November 2022 was its loans to FTX’s hedge fund, Alameda Research. Despite the challenges, BlockFi confirmed that its Wallet customers can currently initiate withdrawals. Meanwhile, those holding BlockFi Interest Accounts and Retail Loans might need to wait for a few more months to be repaid. The final repayment amount, however, might hinge on the outcome of FTX’s bankruptcy case.
BlockFi’s Wallet customers have been directed to access the application and send a withdrawal request, which would enable the team to facilitate the repayment process. On the other hand, clients with BlockFi Interest Account (BIA) and Loans have been informed that the initial repayments as per the bankruptcy plan will begin early in 2024.
Earlier in August, BlockFi initiated withdrawals for eligible users’ wallets in the United States, as directed by the bankruptcy court. While this was certainly a positive step, this withdrawal option was limited to U.S.-based customers. For customers located overseas, the situation remains more complex as legal proceedings are still ongoing.
The move came shortly after a New Jersey judge gave the green light for BlockFi wallet holders to re-access their funds that have been frozen on the platform since November.
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 crypto 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.