Blockfi, a bankrupt cryptocurrency lender, has requested court approval for the sale of its lending business to generate funds for creditor repayment. Despite previous attempts to sell the platform to third-party buyers, Blockfi received no value-optimizing offers. The Chapter 11 restructuring plan filed with the US Bankruptcy Court in Trenton, New Jersey is intended to solicit approval from creditors and retail customers, subject to court approval. Regulatory developments contributed to the failure of attractive prospective buyers. The plan will consist of the Self-Liquidation Transaction, distributed assets to creditors in accordance with the plan terms followed by the liquidation of its affairs.
FTX Claims to Enhance Recovery
Creditors and clients can expect recoveries driven primarily by claims against commercial counterparties including bankrupt crypto exchange FTX, Alameda Research, 3AC, Emergent, and Marex. Collectively, the commercial counterparties owe BlockFi approximately $1bn out of which FTX has provided a $250m revolving credit facility to BlockFi in response to its liquidity struggles during the bear market.
The lender stated that successful litigations would significantly impact client recoveries and that it would pursue these actions based on the Liquidation Analysis.
It is noteworthy that assets in BlockFi’s interest-bearing accounts do not belong to users attempting to reclaim them. The company was instructed to cancel all pending transactions caused by users after the company halted withdrawals last year.