Crypto lender BlockFi is edging closer to repaying customers, marking its triumph over bankruptcy. The platform urged customers to front their withdrawal requests.
The digital assets lender clarified that customers with interest-bearing accounts should exercise patience till 2024 when they will submit withdrawal requests.
Crypto Lender BlockFi Emerges from Bankrutpcy
The collapsed crypto lender BlockFi revealed on Tuesday, October 24, that it was emerging from bankruptcy. The firm declared that the bankruptcy recovery plan would become effective on October 24.
A firm realizes emergence when it successfully reorganizes the balance sheet to afford to repay the creditors, unlike when it was entering bankruptcy. Although it is evident that the lender is not restituting the clients in totality, it is notable for initiating the transition towards the recovery of the customer assets. The recovery targets third parties and progressively reconciles the customer claims.
The Tuesday statement hailed the BlockFi achievements for reaching the Effective Date quicker and more efficiently, unlike other retail crypto firms. A revisit of BlockFi’s journey reveals bankruptcy filing on November 28. The filing occurred a month following the sudden implosion of crypto exchange FTX and affiliate trading firm Alameda Research.
BlockFi admitted suffering $1.2 billion in exposure to Sam Banmkan-Fried’s FTX empire. Both firms – FTX and Alameda Research, now battle allegations of multi-billion dollar fraud by misappropriating customer assets.
BlockFi Prioritizes Recovering Assets From Bankrupt Firms
BlockFi reassured that its present efforts would prioritize recovering assets from the bankrupt crypto firms – FRX, Three Arrow Capital (3AC), and Alameda. The lender emphasized that successful litigation would optimize the client’s recoveries.
The statement indicated that the recovery starts with the custodial wallet customers. However, loan customers and holders of interest-bearing accounts (BIA) would wait longer until the initial distribution in early 2024. BlockFi stated that subsequent distributions are reliant on multiple factors. Primarily, the distribution is dependent on the recoveries realized from the embattled FTX and affiliates.
BlockFi is hopeful of a successful recovery from FTX and is mulling relaunching the exchange in its recovery plan. The collapsed crypto exchange is confident of the existing customer recovering stake upon its relaunch. Also, FTX is considering the option of courting a partner to facilitate its reboot. The other alternative is selling the crypto exchange entirely.
BlockFi Accuses Alameda for Misconduct that Plunged Crypto Firms into Bankruptcy
The BlockFi emergence from bankruptcy shines optimism for trading firms that plunged in 2022. Among the firms battling bankruptcy include Genesis, Voyager Digital, and Celsius.
The majority of the bankrupt firms have been called victims of FTX fraud. A recent admission via testimony by former Alameda Research chief executive Caroline Ellison. The ex-Alameda boss admitted presenting a falsified balance sheet to Genesis, portraying the FTX’s trading affiliate as less risky.
The ex-BlockFi chief executive Zac Prince accused Alameda of misbehavior days later. The former crypto lender’s boss decried the decision by Alameda to hide the loans advanced from FTX within the balance sheet presented.
BlockFi’s creditors alleged that Alameda emerged as the prince of lending an amount estimated at $1B despite the awareness of the terrible financial health. The recovery of FTX to repay claims to creditors has dominated recent statements, though, with the exact percentage relative to the obligations increasing.
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