Bankruptcy Judge Approves BlockFi’s Plan to Pay Back Customers
BlockFi, the bankrupt crypto lending firm, has received approval from bankruptcy Judge Michael A. Kaplan to proceed with a new plan to repay its customers. The court filing on Tuesday stated that the debtors are now responsible for creating a list of all the creditors, specifically highlighting the top 50 who did not have secured loans. Mark Renzi, BlockFi’s chief restructuring officer, supports this revised plan.
Initially, BlockFi presented its liquidation plan to the bankruptcy court on November 28 but had to make revisions and submit updated plans. FTX’s lawyers criticized the latest plan, arguing that it was unfair to FTX’s claims and urged the court to reject it.
FTX’s Involvement Raises Questions
BlockFi attributes its difficulties to FTX’s bankruptcy, stating that it had significant exposure to the collapsed crypto exchange. Withdrawals were suspended by BlockFi on November 11, 2022, the same day FTX declared bankruptcy. Later, on November 22, BlockFi sought Chapter 11 bankruptcy protection.
In July, FTX creditors alleged that BlockFi CEO Zac Prince was aware of FTX’s financial troubles before its collapse in November 2022. An August court document indicated that unsecured creditors of BlockFi may receive between 35% and 63% of their claimed amounts depending on the outcome of legal battles against FTX and other bankrupt cryptocurrency firms.
BlockFi owes approximately $10 billion to its debtors, including $1 billion to its three largest lenders and $220 million to crypto fund Three Arrows Capital.
Decrypt has reached out to BlockFi for comment and will update this article if the company responds.
Hot Take: BlockFi Moves Closer to Repaying Customers Amidst Bankruptcy Proceedings
BlockFi’s new plan to repay its customers, approved by the bankruptcy court, marks a significant step forward in the company’s efforts to address its financial obligations. By compiling a list of creditors and prioritizing the top 50 non-secured lenders, BlockFi aims to allocate funds in a fair and transparent manner. However, the involvement of FTX in BlockFi’s bankruptcy raises questions about the extent of their connection and the impact it has had on BlockFi’s financial situation. As legal battles continue, the outcome will determine the final repayment percentages for unsecured creditors. With billions of dollars owed to debtors, BlockFi faces a challenging road ahead as it seeks to navigate through bankruptcy proceedings.
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