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BlockFi's Court-Approved Liquidation: Moving Forward

Martin Walker
Sep 27, 2023 at 07:30 am

The liquidation strategy for the financially troubled cryptocurrency lending entity, BlockFi, has been greenlit by the US Bankruptcy Court in New Jersey, moving the clientele closer to receiving their payments. The approval came during a court session on September 26, as per the records of the same date.

The repayment extent for BlockFi's unsecured debt holders is contingent upon the outcome of its legal dispute with FTX and other bankrupt cryptocurrency enterprises. This situation has added a layer of complexity to the reimbursement process.

Sept. 26 court filing in the bankruptcy case of BlockFi. Source: KrollSept. 26 court filing in the bankruptcy case of BlockFi. Source: Kroll

Initiating the liquidation proposal on November 28, BlockFi had to modify its plan multiple times - first on May 12, then on June 28, and again on July 31, according to court documents.

BlockFi's liquidation proposition garnered the court's approval following a settlement with the creditors committee regarding the firm's senior management, marking the resolution of a prolonged disagreement.

A document filed on September 25 disclosed that the creditors committee of BlockFi acknowledged that the settlement could potentially curtail further administrative costs and expenditures, ultimately safeguarding the recoveries.

The current insolvency of BlockFi is attributed to the collapse of FTX, a claim that is contested by the creditors committee, who voiced apprehensions about BlockFi's association with FTX and its former CEO, Sam Bankman-Fried.

Estimates indicate that BlockFi owes a substantial sum, reaching up to $10 billion, to a vast pool of over 100,000 creditors. Among them, the three largest creditors are owed a total of $1 billion, while a bankrupt crypto hedge fund, Three Arrows Capital, is owed approximately $220 million.

In this complex legal and financial landscape, BlockFi is being legally represented by Kirkland & Ellis LLP and Haynes and Boone LLP.

Read more: Sam Bankman-Fried's Day: A Bumpy Ride

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