Bankrupt lender BlockFi to liquidate lending platform News ▸ US ▸ Bankruptcy
Bankrupt lender BlockFi to liquidate lending platform
BlockFi said the amount its creditors will get depends on the outcome of its pending suit against bankrupt Alameda Research, FTX, others.
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Updated: May. 15, 2023 at 8:49 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Bankrupt crypto lender BlockFi has decided to liquidate its crypto lending platform stating that selling will not generate enough value for its creditors.
The firm, which owes its top 50 creditors more than $1.3 billion, filed its Chapter 11 restructuring plan with US Bankruptcy Court on May 12. The plan would be sent to its creditors, who would vote on it.
According to the New Jersey-based company, it decided to liquidate after concluding that a sale might not generate meaningful value for its creditors. The company claimed to have been discussing with potential buyers since January and cited the recent regulatory concerns as one of the reasons it could not get a good offer.
Earlier in the month, the firm received permission to return $297 million to certain customers as part of its bankruptcy proceedings.
BlockFi could get over $1B from litigation against other bankrupt firms
However, the bankrupt lender noted that the amount that creditors will get depends mainly on the outcome of its pending suit against Alameda Research, FTX, Three Arrows Capital, and crypto miner Core Scientific.
The lender said successful litigation against all these counterparties “will make a difference of in excess of $1 billion” for clients. Interestingly, all these companies have also filed for bankruptcy.
The company projected about $1.6 billion in recoveries from different accounts, noting that actual recoveries might differ significantly from projected numbers.
The most crucial factor would be the success of its claims against Sam Bankman-Fried’s failed crypto companies — FTX and Alameda. BlockFi has an outstanding loan of $671 million in crypto to Alameda Research and another $355 million stock on the FTX exchange.
The court has already ordered BlockFi to return almost $300 million to its custodial wallet users, saying they belong to the clients and not the bankruptcy estate. The hearing of the plan is set for June 20.
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Oluwapelumi values Bitcoin's potential. He imparts insights on a range of topics like DeFi, hacks, mining and culture, underlining transformative power.
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In this article
BlockFi
BlockFi is a defunct cryptocurrency lender company which is currently in bankruptcy proceedings.
FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Core Scientific
Core Scientific is a leader in infrastructure and software solutions for Artificial Intelligence and Blockchain.
Alameda Research
Alameda Research was once a principal trading firm, operating as an arm of the failed crypto exchange, FTX.
Three Arrows Capital
Three Arrows Capital (3AC), a Singapore-based crypto hedge fund, collapsed due to poor risk management, recklessness in dealing with business partners and a significant portion of greed.
