BlockFi Submits Motion to Return Frozen Crypto to Wallet Users

Table of Contents

• How BlockFi and FTX Became Financially Entangled
• Details of BlockFi’s Motion

Bankrupt cryptocurrency lender BlockFi has filed a motion to a United States bankruptcy court for permission to return frozen cryptocurrencies held in BlockFi wallets to its users.

Crypto lending platform BlockFi filed a motion on December 19 to a U.S. Bankruptcy Court in the District of New Jersey seeking permission to allow its users to withdraw their cryptocurrencies from frozen BlockFi wallets. In the motion, BlockFi asked the court for authority to honor client withdrawals from wallets that have been frozen since November 10. The news was first reported by Cointelegraph. 

How BlockFi and FTX Became Financially Entangled

BlockFi filed for Chapter 11 bankruptcy protection in the US late in November just days after it was forced to suspend withdrawals amid the fallout from the complete collapse of FTX. BlockFi became financially entangled with FTX in June 2022 when the exchange agreed to provide the company with a credit line of $400 million. By extending the credit line, FTX also acquired the option to buy BlockFi.

The agreement between the two companies meant that they became financially involved and the fall of FTX has obviously had serious implications for BlockFi. As previously stated, only a couple of days after FTX’s collapse, BlockFi suspended withdrawals saying that it had “significant exposure” to FTX, including undrawn amounts still existing from the credit line FTX extended to it.

Details of BlockFi’s Motion

Included in BlockFi’s court documents, the firm requested permission to update its user interface to properly reflect transactions as of the platform’s pause. BlockFi also shared an email to affected users calling the motion an “important step toward our goal of returning assets to clients through our chapter 11 cases.”

BlockFi added:

It is our belief that clients unambiguously own the digital assets in their BlockFi Wallet Accounts.

BlockFi further indicated that their motion will not impact withdrawals or transfers from BlockFi Interest Accounts as they remain paused at the moment. According to the documents filed to the court, a hearing to decide if the motion will be granted is scheduled for January 9, 2023.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.