Core

Celsius

April

BlockFi has announced that it plans to liquidate its crypto lending platform to pay back creditors, the company stated in a New Jersey bankruptcy court document filed on Friday.&nbsp;
Creditors have been given until the 28th of July, 2023, to vote on the company&rsquo;s restructuring plan if the court approves it.
Liquidation The Only Viable Option&nbsp;
The bankrupt company stated that it had come to the conclusion that selling the business would not generate adequate value for its creditors. BlockFi had been given an extension to formulate its bankruptcy plan in April adequately. Debtors associated with the bankrupt lender also filed their amended reorganization plan and disclosure statement on Friday. BlockFi&rsquo;s Chapter 11 reorganization plan will be sent to its creditors, including over 100,000 retail customers, for a vote.&nbsp;
The court will determine which creditors that have repayment claims are eligible to vote on BlockFi&rsquo;s restructuring plan. Creditors that the court has given voting rights will have time until the 28th of July, 2023, to vote in favor or against the plan. Alternatively, they can also opt to sit out the voting process. BlockFi stated that it had engaged with potential buyers in an effort to conclude a sale of its digital assets platform and around 660,000 client accounts. However, it came to the conclusion that a sale would not generate adequate value for its creditors.&nbsp;
BlockFi blamed recent regulatory developments and problems as a prominent reason why it was unable to receive adequate offers from potential buyers.&nbsp;
Recovery Depends On Outcome Of Pending Litigation&nbsp;
BlockFi&rsquo;s lawyers, in a letter to creditors, stated that asset recovery for their clients depends on the outcomes of lawsuits against other firms that it claims had defrauded them. These firms include crypto trading firm Alameda Research and cryptocurrency exchange FTX. Both entities were founded by Sam Bankman-Fried. Apart from these two companies, the list consists of crypto miner core scientific and crypto hedge fund Three Arrows Capital (3AC). According to BlockFi lawyers, the success or failure of the lawsuits against these firms could make a difference totaling in excess of $1 billion for clients. BlockFi noted,&nbsp;

&ldquo;The results of that litigation may achieve prospective high-end recoveries exceeding 90% for certain classes of claims. Client recoveries will be increased or decreased massively (with total swings in client recoveries potentially exceeding $1 billion) depending on whether BlockFi can succeed in these litigations.&rdquo;

The developments come after a significant win for BlockFi customers that had crypto held in custodial, non-interest-bearing accounts. According to reports, US Bankruptcy Judge Michael Kaplan gave permission to BlockFi to return around $297 million to customers that operated these types of accounts. Judge Kaplan ruled that the customers in question were the owners of their deposits held in BlockFi&rsquo;s wallet program. BlockFi&rsquo;s wallet program did not pay out any interest to customers and kept funds separate from other funds held by the company. BlockFi had frozen transfers in November 2022, shortly before declaring bankruptcy, as it got caught in the maelstrom triggered by the FTX collapse.&nbsp;
Crypto Firms Continue To Struggle&nbsp;
Several cryptocurrency firms had to file for bankruptcy over the past year. These include Alameda Research, FTX, Celsius Network, Core Scientific, Three Arrows Capital, and Voyager Digital. Some of the firms in question have had to go the way of liquidation as they struggle to come up with funds and strike deals to help them out of bankruptcy.&nbsp;
The US arm of cryptocurrency exchange Binance had, last month, terminated an agreement with Voyager Digital to purchase user accounts. Binance cited several regulatory concerns as the reason behind the termination of the agreement. Voyager then stated it would go ahead with liquidation pending any objections before the 15th of May deadline.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

BlockFi To Liquidate Crypto Lending Platform To Pay Back Lenders

Crypto Daily™

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