Bankrupt cryptocurrency lending platform BlockFi's restructuring plan has taken a step closer to fruition, as the firm announced that its disclosure statement has received conditional approval from the U.S. Bankruptcy Court in New Jersey.
This development is a critical part of the company's mission to maximize recoveries for creditors and expedite the return of cryptocurrencies to clients, said Mark Renzi, BlockFi’s chief restructuring officer.
The firm's restructuring plan will allow to direct efforts towards recouping funds from other failed businesses such as , , , Emergent, Marex, and . However, the proposed plan has not been devoid of criticism,.
Organizations like FTX, Three Arrows Capital, and the Securities and Exchange Commission have voiced concerns about the plan's fairness and its potential to absolve BlockFi and its management from legal responsibility, especially with disputed transactions worth over a billion dollars hanging in the balance.
Under the new plan, BlockFi intends to refund non-wallet funds back to customers, while also creating a "convenience claim class" for customers with claims under $3,000, who would receive a lump sum payout equating to 50% of the total claim. The company will also refrain from clawing back amounts under $250,000 that clients properly transferred from BlockFi interest accounts or BlockFi private client accounts to wallets.
Despite the progress, hurdles remain. FTX and Three Arrows Capital have contested the disclosure statement, citing failure to meet bankruptcy code requirements and provide adewquate information for creditors to evaluate the feasibility of BlockFi's strategy. Meanwhile, the more detailed information on the releases.
comes after allegations of fraud by the company's unsecured creditors and former CEO Zac Prince. The firm was accused of breaking promises to customers by liquidating nearly $240 million in customers' crypto, which forms part of the justification for the move to appoint a Chapter 11 trustee outside of its bankruptcy plan. The deadline for voting on BlockFi's proposed reorganization is slated for September 11.
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