BlockFi’s Bankruptcy Plan Progresses with Conditional Approval from Court; Focuses on Recovering Funds from Defunct Firms

BlockFi’s Bankruptcy Plan Progresses with Conditional Approval from Court; Focuses on Recovering Funds from Defunct Firms

BlockFi’s bankruptcy plan continues to advance steadily, as the company has disclosed that the United States Bankruptcy Court for the District of New Jersey has conditionally approved its disclosure statement.

On August 2, 2023, BlockFi and the Official Committee of Unsecured Creditors jointly issued a statement, urging all eligible parties to vote in favor of accepting the plan by the September 11 voting deadline. Upon successful approval, the plan will effectively resolve the Chapter 11 cases and facilitate the return of client funds.

Once the bankruptcy plan secures approval, the lender has outlined its intention to focus on recovering funds from various defunct firms, including Alameda Research, FTX, Three Arrows Capital, Emergent, Marex, and Core Scientific. The primary objective is to optimize client recoveries while safeguarding against potential claims from third parties that could significantly impact client assets.

As per the announcement, the plan provides clients with the opportunity for releases, provided they choose not to opt out of a voluntary third-party release. This release exempts them from all claims and causes of action that may have against them. However, this release is not applicable to clients who withdrew $250,000 or more from BlockFi Interest Accounts (BIA) or BlockFi Private Client (BPC) Accounts on or after November 2, 2022.

Furthermore, the plan ensures that BlockFi will not reclaim amounts under $250,000 that clients properly transferred from BIAs or BPCs to BlockFi Wallet and withdrew from the Wallet before the platform paused on November 10, 2022. Clients with claims under $3,000, or those who choose to reduce their claim to $3,000, will be included in the convenience claim class and receive a one-time cash distribution equal to 50% of their claim from the BlockFi estate.

In June, the United States Securities and Exchange Commission agreed to postpone the collection of a $30 million fine from the bankrupt cryptocurrency lender until creditors are fully repaid. This amount represents the remaining balance of a $50 million settlement reached with the regulator in February 2022.