BlockFi Emerges From Bankruptcy, Moves To Unlock Withdrawals
Cryptocurrency lending platform BlockFi announced it has emerged from Chapter 11 bankruptcy proceedings as of October 24, 2023. The company filed for bankruptcy in November 2022 amid broad industry turmoil.
BlockFi said its restructuring plan has now taken effect, allowing the company to begin repaying creditors per the bankruptcy terms. Key points:
- BlockFi aims to recover assets from failed crypto firms like FTX to increase client payouts. Litigation success could boost recoveries.
- The company will continue processing client crypto withdrawals, including for BlockFi Interest Account (BIA) holders.
- An initial distribution to BIA and loan holders is targeted for early 2024. The timing of any subsequent payouts depends largely on FTX bankruptcy recoveries.
- Wallet clients should withdraw funds before the December 31, 2023, deadline, after which the company pivots to preparing BIA distributions.
- The total creditor recovery amounts remain uncertain, hanging mainly on BlockFi’s treatment as an FTX creditor.
What happened to BlockFi?
BlockFi entered bankruptcy in November 2022 after the collapse of the crypto exchange FTX, to which it had significant exposure.
In May 2023, BlockFi was granted court approval to return $297 million to clients with non-interest-bearing accounts.
By September 2023, BlockFi had secured court approval for its bankruptcy plan. Additionally, the plan outlined potential partial repayments to creditors by year’s end. According to court filings, some creditors may receive compensation in Bitcoin or Ethereum.
BlockFi was also involved in disputes with FTX and hedge fund Three Arrows Capital during its bankruptcy regarding potential asset recoveries. The outcome of these legal battles remains pending.
BlockFi emerged from Chapter 11 bankruptcy proceedings in October 2023, allowing the approved plan to take effect.
BlockFi reminded clients that its bankruptcy exit enables the company to enact its restructuring plan. In addition, this involves recovering assets, processing withdrawals, and reconciling claims ahead of initial creditor distributions next year.
The company’s aim now is to execute the plan efficiently post-bankruptcy. But significant uncertainties around client recoveries persist given failed exchange FTX’s central role in BlockFi’s financial collapse.
