A significant milestone has been reached as the United States Bankruptcy Court in New Jersey has granted approval for BlockFi’s liquidation plan, a development that has been long awaited by the company’s 100,000-plus creditors.
The customers of BlockFi, a cryptocurrency lending platform that has filed for bankruptcy, are now one step closer to receiving their payouts. This positive development came to fruition during a court hearing on September 26, where Bankruptcy Judge Michael A. Kaplan gave the green light to BlockFi’s third amended Chapter 11 plan, as evidenced by a filing on the same day.
The quantum of repayment that unsecured creditors of BlockFi will ultimately receive hinges largely on the outcome of BlockFi’s ongoing legal battle against FTX and other cryptocurrency firms that have also faced bankruptcy.
BlockFi initially presented its liquidation plan to the bankruptcy court on November 28, but subsequent revisions were necessitated, resulting in first, second, and third amended plans submitted on May 12, June 28, and July 31, respectively, as indicated by court documents.
The approval of BlockFi’s liquidation plan was secured following the resolution of a protracted dispute with the creditors’ committee, particularly in relation to the company’s senior management, as documented in a court filing dated September 25. The creditors’ committee for BlockFi acknowledged that this settlement likely mitigated additional administrative fees and expenses that could have eroded the overall recoveries for creditors.
BlockFi, now grappling with bankruptcy, attributes its downfall to FTX’s collapse, despite concerns expressed by the creditors’ committee regarding BlockFi’s relationship with FTX and its former CEO, Sam Bankman-Fried.
Estimates indicate that BlockFi is indebted to a sum of up to $10 billion, distributed among over 100,000 creditors. This includes a debt of $1 billion owed to its three largest creditors and $220 million to the insolvent cryptocurrency hedge fund, Three Arrows Capital.
BlockFi is presently represented by the law firms Kirkland & Ellis LLP and Haynes and Boone LLP.