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This is how much bankrupt crypto lender BlockFi could gain from FTX recovery
Crypto lender BlockFi recently announced that it would go ahead with the liquidation process due to the ongoing uncertainty around the regulatory landscape in the U.S. The company decided so as it couldn’t sell its business in the U.S.
- Successful litigation against FTX and Alameda could add over $1 billion to BlockFi’s coffers
- The crypto lender still owes millions of dollars to SEC and NASAA
Bankrupt crypto lender – BlockFi – announced that it would proceed with liquidating the platform. The company decided to move in this direction as it could not sell its business, given the regulatory environment in the United States.
According to a report by the Wall Street Journal, the company’s liquidation balance sheet heavily depends on the money it recovers from several crypto entities. The crypto lender filed for Chapter 11 proceedings in November 2022 as a result of the collapse of FTX – a top crypto exchange at the time.
BlockFi had loaned Alameda $831.1 million and had assets worth $415.9 million linked to FTX. The platform immediately moved to recover its assets from the crypto exchange. BlockFi had laid claims on Sam Bankman-Fried’s Robinhood shares, which were worth $575 million.
These shares currently rest in the hands of the U.S. Department of Justice, with Robinhood seeking to buy them back. Additionally, BlockFi acknowledged that retrieving the money would take time due to the bankruptcy proceedings of FTX itself.
A big boost for BlockFi’s balance sheets
A filing, published on 12 May, stated that the company could add more than $1 billion to its balance sheet if it could recover assets from FTX. The crypto lending firm also made claims against other bankrupt firms – Three Arrows Capital, a crypto hedge fund, and Core Scientific, a Bitcoin miner.
The filing read, “The ultimate recovery to Clients and other creditors will depend heavily on the Debtors’ success or failure in prosecuting and defending against pending and future disputes with BlockFi’s commercial counterparties, including Alameda, FTX, Emergent, ED&F Man Capital Markets.”
Moreover, BlockFi is still subjected to the fines received from regulatory authorities. The company has to pay the US Securities and Exchanges Commission (SEC) $30 million. The SEC fined the platform a whopping $100 million in early 2022 for not registering the lending platform. As a result, the crypto lending platform agreed to pay the penalty in five installments. Out of the five, the company has fulfilled the payment of only two.
In addition, BlockFi has outstanding payments with North American Securities Administration Association (NASAA). The regulator had taken action against the platform with charges relating to state securities law violations. This resulted in the firm incurring a penalty of $50 million, out of which $29.4 million is still pending. Some reports suggested that this payment could take priority over others.
