BlockFi, the beleaguered cryptocurrency lending platform that recently filed for bankruptcy, has received the green light to initiate the repayment process for its customers. This significant development was granted approval by the United States Bankruptcy Court in New Jersey as part of BlockFi’s revised liquidation plan.
BlockFi’s customers, who had faced uncertainty regarding the recovery of their assets, are now one step closer to being compensated. This milestone was achieved following the approval of BlockFi’s third amended Chapter 11 bankruptcy plan by Judge Michael A. Kaplan during a court hearing held on September 26th. However, the final payout amount to BlockFi’s creditors remains contingent on the outcome of ongoing legal battles, particularly with FTX and several other bankrupt cryptocurrency firms.
A court filing on September 15th revealed that BlockFi’s creditor committee successfully negotiated reductions in additional administrative fees and expenses that could have eroded creditors’ recoveries.
BlockFi’s chief restructuring officer, Mark Renzi, expressed support for the amended plan, and previous objections raised by FTX debtors have been partially resolved. However, certain concerns raised by the United States Securities and Exchange Commission (SEC) still need to be solved, including technical modifications to the amended plan.
The next phase of the plan entails debtors submitting a compiled registry, which will include a consolidated list of all creditors and a separate list of the top 50 unsecured creditors. Additionally, the debtors intend to protect the personally identifiable information of individual creditors. Recent reports suggest that unsecured creditors of BlockFi may receive varying payouts, ranging from 35% to 63% of the total amount owed. Some creditors will receive partial payments in the form of Bitcoin (BTC) and Ethereum (ETH).
Allegations Against BlockFi CEO
BlockFi had attributed its liquidity crisis and subsequent bankruptcy to the now-insolvent FTX exchange. However, creditors of FTX allege that Zac Prince, BlockFi’s CEO, was aware of FTX’s worsening financial situation before the exchange’s collapse.
In the ongoing dispute between the two parties, BlockFi’s creditors have requested the court to appoint a new management firm to oversee BlockFi’s bankruptcy plan and proceedings. They claim that there was a misallocation of funds, specifically pointing to BlockFi’s decision to liquidate its crypto assets in November.
Furthermore, creditors allege that BlockFi’s sale of $240 million worth of crypto assets after the bankruptcy led to a $100 million loss during the subsequent market rally. In an earlier filing, BlockFi’s chief restructuring officer, Mark Renzi, emphasized the importance of maximizing recovery for BlockFi’s customers throughout the recovery process.