The United States Bankruptcy Court in New Jersey has given its approval to BlockFi’s customer repayment plan, offering a glimmer of hope to investors looking to recover a portion of their investments by the year’s end.
Bankruptcy Judge Michael A. Kaplan officially approved BlockFi’s third amended Chapter 11 plan during a September 26 court hearing. This crucial decision comes after the company engaged in a protracted dispute with the creditors committee over its senior management’s actions.
The approval of BlockFi’s liquidation plan is a significant step forward for creditors. It means that some unsecured creditors of the struggling crypto lender may soon receive partial repayment, with the possibility of receiving their funds in popular cryptocurrencies like Bitcoin (BTC) or Ethereum (ETH), as detailed in court documents.
Meanwhile, the estimated recovery for unsecured creditors of the platform varies, ranging from approximately 35% to 63% of their owed amounts. However, the final payout is contingent on the outcome of BlockFi’s ongoing legal battles with entities like FTX and other bankrupt cryptocurrency firms.
The lending platform has emphasized that the resolution of these disputes could potentially impact creditor recoveries by up to $1 billion.
Another court filing from September 25 noted that a settlement likely reduced additional administrative fees and expenses, which ultimately benefits creditors by preserving their overall recoveries.
The committee overseeing the process expressed optimism that Blockfi’s customer repayment plan could commence this year.
BlockFi’s Turbulent Journey
BlockFi was a cryptocurrency lending company that allowed users to deposit their crypto and earn interest on it. It also offered users the ability to borrow money against their crypto holdings. The company was founded in 2017 and quickly became one of the most popular crypto lending platforms.
However, in November 2022, the firm filed for Chapter 11 bankruptcy protection after its largest partner, FTX, collapsed.
BlockFi had significant exposure to the FTX exchange, and its bankruptcy filing cited the collapse of FTX as a major factor in its own financial difficulties.
It subsequently halted customer withdrawals in November 2022, just before FTX declared bankruptcy. Initially exploring restructuring under Chapter 11, BlockFi later determined that liquidation was the most viable option for repaying its customers.