Customers of the insolvent cryptocurrency lending platform, BlockFi, are nearing a financial resolution, as the United States Bankruptcy Court in New Jersey has sanctioned its liquidation scheme.
In a court session on 26 September, Bankruptcy Judge Michael A. Kaplan ratified BlockFi’s third revised Chapter 11 arrangement, as depicted in documentation filed the same day.
The compensation that BlockFi’s unsecured creditors will receive is predominantly contingent upon the outcome of BlockFi’s ongoing legal skirmish with FTX and other insolvent cryptocurrency entities.
BlockFi initially presented its liquidation proposal to the bankruptcy court on 28 November, thereafter being obligated to submit the first, second, and third revised proposals on 12 May, 28 June, and 31 July respectively, according to court records.
The sanction of BlockFi’s liquidation strategy occurred after the company resolved an extended disagreement with the creditors’ committee regarding the company’s senior management.
Documentation from a 25 September court session reveals that the BlockFi creditors’ committee’s acceptance of the settlement likely mitigated additional administrative fees and expenditures, preventing further diminution in the recoveries.
BlockFi, now in insolvency, attributed its demise to the collapse of FTX, ignoring the creditor’s committee’s concerns regarding BlockFi’s affiliations with FTX and its former CEO, Sam Bankman-Fried.
Relatedly, BlockFi has requested legal permission to convert trade-only assets into stablecoins.
Estimates disclose that BlockFi owes roughly £10 billion to more than 100,000 creditors, including £1 billion to its three largest creditors and £220 million to the insolvent cryptocurrency hedge fund Three Arrows Capital.
BlockFi is receiving legal representation from the law firms of Kirkland & Ellis LLP and Haynes and Boone LLP.
