BlockFi emerges from bankruptcy: All you need to know
- BlockFi can now actively pursue the recovery of assets from entities that owe the company money.
- The platform has also allowed international users to proceed with withdrawals.
Crypto lending platform BlockFi has made a significant announcement, marking its emergence from bankruptcy. As of 24 October, BlockFi has started the process of paying back some of its creditors, with the ability for customers to make withdrawals from their Wallets.
Moreover, it has plans for BlockFi Interest Account (BIA) and Loan customers to withdraw assets in early 2024.
This development allows BlockFi to actively pursue the recovery of assets from entities it believes owe the company money. These entities include crypto platforms such as Three Arrows Capital, also known as “3AC,” and FTX [FTT].
BlockFi is now in a position to continue the distribution of assets to creditors and process claims, signaling a fresh start for the platform.
Wallet customers who have assets stored with BlockFi are encouraged to log into the app and initiate a withdrawal request, allowing the BlockFi team to facilitate these transactions.
These initial distributions are anticipated to take place in early 2024. Subsequent distributions will follow, contingent on BlockFi’s progress in the FTX bankruptcy litigation and other factors.
Fresh start to follow withdrawals and asset recovery
BlockFi faced liquidity issues in mid-2022, primarily triggered by the collapse of Terra [LUNA]. FTX intervened by extending a $400 million credit line to rescue the platform.
However, the situation took a downturn when FTX itself filed for bankruptcy in November, which had a cascading effect on BlockFi. The bankruptcy court approved a plan for BlockFi to wind down its operations and repay its creditors on 17 August.
BlockFi reportedly maintained significant amounts of its clients’ funds within FTX. This was despite having early knowledge of the exchange’s questionable financial situation.
The Committee of Unsecured Creditors for BlockFi disclosed that the company was aware of FTX’s overexposure to FTT through Alameda Research as early as August 2021.
Despite these concerns, BlockFi’s CEO, Zac Prince, continued to engage with FTX, granting billion-dollar loans collateralized by the token. BlockFi’s bankruptcy followed, and FTX and Alameda Research also entered insolvency.
Creditors have demanded the immediate liquidation of assets to cover costs.