The deadline for submitting bids for the Bitcoin-machine-backed loans is January 24.
According to sources, the bankrupt crypto lending firm BlockFi intends to sell $160 million in debts secured by about 68,000 Bitcoin mining machines as part of its bankruptcy procedures.
According to a Bloomberg story from January 24, two “familiar with the subject” believe that BlockFi began the process of selling off the loans last year.
The crypto lender declared Chapter 11 bankruptcy in November 2022, blaming its demise on its considerable exposure to the now-defunct crypto exchange FTX.
According to the sources, some of these loans have already failed since then and may be undercollateralized due to the drop in the price of Bitcoin mining equipment. The deadline for bidders to submit offers for the loans is Jan. 24.
In comments to Cointelegraph, crypto lawyer Harrison Dell, director at Australian law company Cadena Legal, said that if the value of the Bitcoin mining equipment used as collateral is less than the amount of the loans, the loans are “not worth their paper value to BlockFi anymore.”
Dell stated that the parties bidding on the debts are most “likely” debt collection companies looking to buy for “cents on the dollar.”
He went on to say that selling the debt is most likely “all that the administrators” of BlockFi can salvage for these assets.
Dell also stated that this is only the beginning of what the crypto sector will see. He mentioned:
“This is just the start of the asset sales from BlockFi and other crypto firms in Chapter 11 bankruptcy in the US.”
Cointelegraph contacted BlockFi for comment but did not receive a response by the time this article was published.
BlockFi’s attempt to sell its debts is most likely part of its efforts to pay off its creditors, of which the company has over 100,000 according to its bankruptcy filing in November 2022.
It was alleged at the time of its bankruptcy that BlockFi sold $239 million of its own bitcoin holdings to fund bankruptcy expenses and told around 70% of its employees that they would lose their jobs.
BlockFi petitioned the court earlier this week in a Jan. 23 declaration to release funds to allow bonuses for key staff in order to retain them during the Chapter 11 bankruptcy proceedings.
Megan Crowell, BlockFi’s chief people officer, told the court that without financial incentives, the company will struggle to retain staff.
Crowell believes that without competitive wages, many employees will leave the organisation, which will have a long-term financial impact on the company.