In a recent development, popular cryptocurrency lender BlockFi has announced that a US court has conditionally approved its bankruptcy plan and ordered that everyone entitled to vote should vote to accept the plan.
Much-Needed Respite For Creditors
BlockFi’s restructuring plan continues to move forward following the recent announcement by the firm that its disclosure statement had been conditionally approved by the United States Bankruptcy Court in New Jersey. The lending platform says that once the plan is approved, it will proceed to retrieve funds from various defunct companies, including FTX, Emergent, and Alameda.
The plan provides an opportunity for client releases, excluding them from future claims by BlockFi, except for clients who withdrew above $250,000 from their interest accounts or private client accounts after November 2022. The platform also intends to distribute cash to creditors with claims below $3,000.
The US Securities and Exchange Commission had also agreed to delay the collection of a $30 million fine until BlockFi’s creditors were repaid. The amount is part of the outstanding balance of a $50 settlement reached with the SEC in February 2022.
According to BlockFi’s Chief Restructuring Officer Mark Renzi, the platform’s mission through this ongoing exercise “has been to maximize recoveries for our creditors, and conditional approval for our Disclosure Statement moves us one step closer to accomplishing that goal.”
He also noted that BlockFi remains confident that its plan offers “the best path to expeditiously return crypto back to our clients and we strongly urge BlockFi’s clients to vote to accept it.”
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BlockFi And Bankruptcy
Following the collapse of the popular cryptocurrency exchange platform FTX in November 2022, BlockFi announced that it was suspending withdrawals and proceeded to file for bankruptcy days after. At the time, the company noted that it was filing for Chapter 11 bankruptcy protection, with intentions to restructure while continuing operations for the time being.
The company originally filed for Chapter 11 protection in November 2022, citing volatility in the cryptocurrency markets and its exposure to collapsed crypto exchange FTX. And at the time of filing for bankruptcy, the firm had about $257 million cash in hand.
In its petition for bankruptcy, BlockFi stated that it had over 100,000 creditors, including West Realm Shires Inc. with about $275 million in unsecured claims and the SEC with $30 million in unsecured claims.
However, while the vast majority of the other top 50 creditors were not disclosed, the primary objective of the recent announcement by BlockFi is to optimize client recoveries while preventing claims by third parties that might significantly affect client assets.