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The bankrupt crypto lender BlockFi is set to begin repaying its customers after it received approval to begin the repayment process for customers as part of its amended liquidation plan.
The United States Bankruptcy Court in New Jersey approved the liquidation plan.
Customers Set To Be Repaid
The customers of the bankrupt cryptocurrency lending platform, BlockFi have moved closer to being paid out. The development comes after a United States Bankruptcy Court in New Jersey approved of the company’s liquidation plan. The judge overseeing the bankruptcy proceedings, Michael A. Kaplan, approved BlockFi’s third amended Chapter 11 bankruptcy plan during a court hearing on the 26th of September. However, the amount that BlockFi’s creditors receive depends on the outcome of its legal battle with FTX and several other bankrupt cryptocurrency firms.
A court filing on the 15th of September showed that the BlockFi creditor committee mentioned that the settlement had reduced additional administrative fees and expenses that could cut into recoveries.
Uncertainty Surrounding BlockFi Plan
The court filing also highlighted that BlockFi’s chief restructuring officer, Mark Renzi, has also come out in support of the amended plan. The previous objections raised by the FTX debtors have also been partially resolved. However, the limited objection the United States Securities and Exchange Commission (SEC) raised has only been partially resolved. Among the issues that are yet to be resolved is the filing of technical modifications to the amended plan.
According to the filing, the next step in the plan requires the debtors to submit a compiled registry. This registry would include a consolidated list of all creditors and a separate list of the top 50 unsecured creditors. The debtors also want to redact specific personally identifiable information of individual creditors.
According to a recent report, the unsecured creditors of BlockFi could receive varying payouts. These could range anywhere between 35% to 63% of the total amount owed. Other creditors will receive partial payments in the form of Bitcoin (BTC) and Ethereum (ETH).
Allegations Against BlockFI CEO
BlockFi had attributed the liquidity crisis that led to its eventual bankruptcy and downfall to the now-bankrupt FTX exchange. However, creditors of FTX have alleged that Zac Prince, the BlockFi CEO, was aware of FTX’s deepening financial troubles prior to the exchange’s collapse.
During the back and forth between the two, BlockFi’s creditors requested the court to appoint a new management firm to oversee BlockFi’s bankruptcy plan and proceedings. The creditors alleged there was a misallocation of funds, pointing to the decision to liquidate its crypto assets back in November.
The creditors further alleged that BlockFi’s sale of $240 million worth of crypto after the bankruptcy resulted in a loss of $100 million during the subsequent market rally. In an earlier filing, BlockFi’s chief restructuring officer Mark Renzi, highlighted the importance of maximizing the recovery for BlockFi customers during the recovery process,
“BlockFi’s mission through this process has been to maximize recoveries for our creditors, and conditional approval of our Disclosure Statement moves us one step closer to accomplishing that goal. We are confident that our Plan provides the best path to expeditiously return crypto to our clients, and we strongly urge BlockFi’s clients to vote to accept it.”
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.