Crypto Lender BlockFi Emerges from Bankruptcy, Moves to Repay Creditors

Cryptocurrency lending platform BlockFi has emerged from bankruptcy. In a Tuesday blog post, the firm disclosed its intention to pay back its creditors.

“BlockFi’s management, advisors and other stakeholders worked diligently over the past 11 months to reach this critical milestone. We are proud to say that BlockFi reached its Effective Date more quickly and efficiently than many other retail crypto companies”.

What Happened to BlockFi?

BlockFi faced liquidity difficulties in the mid-2022 which it turned to FTX.US for help. To tackle this issue, FTX.US signed a $640 million deal with the firm.

However, FTX collapsed some months later, affecting BlockFi and several other crypto platforms. BlockFi eventually filed for chapter 11 bankruptcy protection and halted client withdrawals in the United States in November 2022, citing the lack of clarity on the status of FTX.com, FTX.US and Alameda.

To wind down the company and repay creditors, a US court approved BlockFi request in September to start reimbursing creditors.

The Bankruptcy Plan

After working on the bankruptcy plan for months, BlockFi said it can now begin a planned wind-down and attempt to recover assets from other companies it believes owe it money. This includes bankrupt crypto platforms such as Three Arrows Capital (also known as “3AC”) and FTX.

BlockFi said it will continue distributing digital assets back to customers and

“Continue the claims reconciliation process to ensure that client claims are accurately reflected in both asset class and amount and that clients receive fair and equitable distributions of remaining and recovered assets”.

The team instructed Wallet customers who are yet to submit a withdrawal request to do so by logging into the BlockFi page. Wallet clients are also expected to withdraw funds before the December 31, 2023, deadline, after which the company pivots to preparing BlockFi Interest Account (BIA) distributions.

In accordance with the bankruptcy plan, BlockFi plans to start initial distribution of assets to BIA holders and Loan customers. The first distribution is expected in early 2024.

Although further distribution should be expected, many factors such as the failed exchange FTX’s central role in BlockFi’s financial collapse might play a significant role in the plan.