Bankrupt cryptocurrency lending platform, BlockFi, has received a glimmer of hope as the United States Bankruptcy Court in New Jersey has approved its liquidation plan. This development is a significant milestone in the ongoing process and brings the customers one step closer to receiving their repayments.
In a court hearing on September 26th, Bankruptcy Judge Michael A. Kaplan approved BlockFi’s third amended Chapter 11 plan. This decision paves the way for the distribution of funds to the platform’s unsecured creditors. The actual amount of repayment remains uncertain and will largely depend on the outcome of BlockFi’s legal battle against FTX and other bankrupt cryptocurrency firms.
BlockFi initially submitted its liquidation plan to the bankruptcy court on November 28th. However, subsequent amendments were required, resulting in the submission of the first, second, and third amended plans on May 12th, June 28th, and July 31st, respectively. These amendments highlight the complexities and challenges faced in reaching a satisfactory resolution for all parties involved.
The approval of BlockFi’s liquidation plan follows the resolution of a long-standing dispute with the creditors committee concerning the company’s senior management. A court filing on September 25th revealed that the BlockFi creditors committee acknowledged that the settlement likely reduced additional administrative fees and expenses, which could have negatively impacted the creditors’ recoveries.
BlockFi’s failure has been attributed to the collapse of FTX, despite concerns raised by the creditors committee regarding the relationship between BlockFi and FTX, as well as its former CEO, Sam Bankman-Fried. This association has cast a shadow of doubt on BlockFi’s future, and the outcome of the legal battle with FTX will significantly influence the repayment process for creditors.
Estimates suggest that BlockFi owes over $10 billion to more than 100,000 creditors, with its three largest creditors alone owed $1 billion. Additionally, the platform owes $220 million to Three Arrows Capital, a bankrupt crypto hedge fund. In the face of such daunting challenges, BlockFi is fortunate to have legal representation from reputable law firms, Kirkland & Ellis LLP and Haynes and Boone LLP.
Despite the obstacles and uncertainties, the approval of BlockFi’s liquidation plan is undoubtedly a step in the right direction. With the distribution of funds towards unsecured creditors imminent, there is renewed hope for the customers who have patiently awaited their repayments. While the road to complete resolution may still be long, this development offers a glimmer of light at the end of the tunnel for BlockFi and its stakeholders.