BlockFi’s Bankruptcy Plan Moves Forward with Court Approval

The reorganization of BlockFi is progressing gradually, with the company disclosing that the United States Bankruptcy Court for the District of New Jersey has conditionally approved its disclosure statement.

The Official Committee of Unsecured Creditors and BlockFi issued a joint statement on August 2, 2023, urging all eligible parties to vote to approve the plan by the September 11 deadline.

The effective resolution of Chapter 11 cases and the recovery of client funds will result from the plan’s successful approval.

Once the bankruptcy plan is approved, the lender plans to focus on recovering funds from several defunct companies, including Alameda Research, FTX, Three Arrows Capital, Emergent, Marex, and Core Scientific.

Screenshot of BlockFi’s press release. Source: Business Wire

The primary goal is to maximize client recoveries while defending against claims from third parties that could significantly dilute client assets.

According to the announcement, the plan provides clients with releases if they do not opt out of a voluntary third-party release, exempting them from all claims and causes of action BlockFi may have against them.

This release applies to most clients, except those who withdrew $250,000 or more from BlockFi Interest Accounts (BIA) or BlockFi Private Client (BPC) Accounts on or after November 2, 2022.

In addition, according to the plan, BlockFi will not reclaim amounts less than $250,000 that clients properly transmitted from BIAs or BPCs to BlockFi Wallet and subsequently withdrew from Wallet before the platform’s suspension on November 10, 2022.

Clients with claims less than $3,000 or who choose to reduce their claim to $3,000 will be included in the convenience claim class and receive a one-time cash distribution from the BlockFi estate equal to 50% of their claim.

In June, the United States Securities and Exchange Commission agreed to postpone the collection of a $30 million sanction from a bankrupt cryptocurrency lender until all creditors had been repaid.

This amount represents the remaining balance of a $50 million settlement agreed upon with the regulator in February 2022.