BlockFi, a cryptocurrency lender, has received court approval to repay its customers and unsecured creditors in full after nearly two years of financial turmoil and legal battles. The US Bankruptcy Court for the District of New Jersey granted this approval, allowing the company to return 100% of customers’ assets. This follows BlockFi’s filing to monetize $874.5 million in claims against FTX, with a third-party claims purchaser acquiring them at a premium over their face value. The approval paves the way for BlockFi customers to finally receive their funds in full, putting an end to the uncertainty they have faced.
BlockFi expressed empathy for its customers and acknowledged the pain they experienced due to the suspension of deposits and withdrawals in 2022. While the asset recovery cannot erase the past financial crisis, the efficient distribution of 100% of the claim value to clients is seen as a positive outcome. The company is collaborating with relevant authorities to ensure a smooth distribution process for international customers, signaling a step towards resolving the issues that have plagued BlockFi in recent years. The approved distribution plan includes interim distributions of crypto assets to eligible customers, with those without a Coinbase account set to receive their assets in cash.
Following the collapse of FTX in November 2022, BlockFi faced severe repercussions and eventually filed for bankruptcy. Legal and financial entanglements between BlockFi and FTX ensued, leading to a challenging period for the cryptocurrency lending platform. A settlement was reached in March, with BlockFi customers set to receive 100% of the dollar value of their claims. However, due to the appreciation of BTC and ETH since the filing date, customers receiving in-kind distributions may receive less cryptocurrency than initially deposited. The distribution process is expected to begin shortly after August 23, 2024, following the earlier settlement with FTX and Alameda Research estates.
In May 2024, BlockFi ceased its web platform operations and announced plans to begin temporary crypto distributions via Coinbase in July. Kroll is managing fiat claims as part of the liquidation process, with the company preparing to cease future operations and maintain legacy systems to support liquidation and distribution. While U.S. clients may face a smoother process, non-U.S. clients could encounter additional verification requirements before receiving their funds. BlockFi’s journey to resolve its financial complications has reached a significant milestone with the court approval for full repayment, marking a turning point in the company’s efforts to address the challenges it has faced.
BlockFi has undergone a tumultuous period of financial turmoil and legal battles, culminating in the approval for full repayment of customers and unsecured creditors by the court. The company’s efforts to monetize claims against FTX and reach a settlement have positioned it to make significant progress towards resolving the issues that have plagued it. The distribution of 100% of claim value to clients represents a positive outcome for BlockFi customers who have endured uncertainty and challenges. With a plan in place for distribution, including interim crypto assets distributions and cash payments, BlockFi is on track to fulfill its commitment to making its customers whole. The settlement and liquidation plans outline the steps BlockFi is taking to wind down its operations and distribute assets, signaling a new chapter for the company as it navigates the aftermath of its financial crisis.
