BlockFi’s Chapter 11 plan progresses with conditional court approval

BlockFi’s reorganization is gradually progressing, with the company revealing that the United States Bankruptcy Court for the District of New Jersey has conditionally approved its disclosure statement.

BlockFi and the Official Committee of Unsecured Creditors jointly issued a statement on Aug. 2, 2023, urging all eligible parties to vote to accept the plan by the Sept. 11 voting deadline. The successful approval of the plan will effectively resolve the Chapter 11 cases and facilitate the return of client funds.

Once the bankruptcy plan receives approval, the lender said it intends to concentrate on recovering funds from several defunct firms, including Alameda Research, FTX, Three Arrows Capital, Emergent, Marex and Core Scientific. The primary aim is to optimize client recoveries while countering claims by third parties that could significantly dilute client assets.

According to the announcement, the plan offers clients the opportunity for releases if they don’t opt out of a voluntary third-party release, which exempts them from all claims and causes of action that BlockFi may have against them. This release applies to most clients, except those who withdrew $250,000 or more from BlockFi Interest Accounts (BIA) or BlockFi Private Client (BPC) Accounts on or after Nov. 2, 2022.

Related: BlockFi CEO ignored risks from FTX and Alameda exposure, contributing to collapse: Court filing

Furthermore, under the plan, BlockFi will not reclaim amounts under $250,000 that clients properly transferred from BIAs or BPCs to BlockFi Wallet, and withdrew from Wallet before the platform paused on Nov. 10, 2022. Clients with claims under $3,000, or those who choose to reduce their claim to $3,000, will be part of the convenience claim class and receive a one-time cash distribution from the BlockFi estate equal to 50% of their claim.

In June, the United States Securities and Exchange Commission consented to delay the collection of a $30 million fine from the bankrupt cryptocurrency lender until creditors are fully repaid. This sum constitutes the remaining balance of a $50 million settlement reached with the regulator in February 2022.

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