BlockFi, the cryptocurrency lending platform that filed for bankruptcy, has received approval to initiate the repayment process for its customers as part of a revised liquidation plan. This development follows conditional authorization granted earlier, allowing the company to reimburse customers before proceeding with the winding-down process.
United States Bankruptcy Court’s Approval
The United States Bankruptcy Court of New Jersey has approved BlockFi’s third amended Chapter 11 bankruptcy plan. The plan received support from BlockFi’s chief restructuring officer, Mark Renzi, and resolved some objections raised, notably those from FTX Debtors.
SEC’s Partial Objection
However, the United States Securities and Exchange Commission (SEC) has only partially resolved its “limited objection” to the plan, indicating that some issues still need further clarification.
Pending Technical Modifications
The filing mentions that certain technical modifications to the amended plan still need to be solved. The next step in the plan involves the debtors compiling a registry that includes a consolidated list of all creditors, along with the top 50 unsecured creditors. Additionally, the debtors intend to redact the personally identifiable information of individual creditors.
Varied Payouts for Unsecured Creditors
A recent report suggests that unsecured creditors of BlockFi may receive varying payouts, ranging from 35% to 63% of their owed amounts. Furthermore, some creditors are slated to receive partial payments in Bitcoin or Ethereum.
Controversial Allegations Against BlockFi CEO
BlockFi has attributed its liquidity crisis, which led to bankruptcy, to the now-defunct crypto exchange FTX. However, creditors of FTX have alleged that BlockFi CEO Zac Prince was aware of FTX’s financial troubles before its collapse in November 2022.
Calls for New Management Oversight
In response to these allegations, BlockFi creditors have strongly urged the court to appoint a new management firm to oversee BlockFi’s bankruptcy plan. They claim funds were misallocated, particularly citing the November decision to liquidate crypto assets.
Market Value Fluctuation
The creditors allege that BlockFi’s sale of $240 million in crypto assets post-bankruptcy resulted in a loss of over $100 million during the subsequent market upswing. This claim is significant, considering that Bitcoin’s price has surged from $16,441 in November 2022 to approximately $26,241 at publication, marking a substantial increase.
Maximizing Recovery for Customers
Mark Renzi emphasized maximizing recovery for BlockFi customers during the proceedings. He expressed confidence in BlockFi’s plan as the best path to return cryptocurrencies to clients efficiently and encouraged clients to vote in favor.
In summary, while BlockFi progresses toward repaying its customers, the bankruptcy proceedings remain complex, with unresolved objections and legal challenges. The outcome will significantly impact creditors, BlockFi’s future, and the broader cryptocurrency lending industry.