Wednesday, 19 June 2024

Crypto News

BlockFi asks court for permission to convert trade-only assets into stablecoins

BlockFi asks court for permission to convert trade-only assets into stablecoins

Defunct crypto lending firm BlockFi applied to the court a request to transfer the trade-only assets from its users’ accounts into stablecoins, so they could be withdrawn by the individuals. The request marks another step toward the return of users’ funds, a process that the company began in August. 

On Aug 29, BlockFi filed an application to the United States Bankruptcy Court for the District of New Jersey, to authorize the conversion of so-called “trade-only” assets into stablecoins. The assets in question — Algorand, Bitcoin Cash and Dogecoin — cannot be withdrawn easily and hence BlockFi suggests a one-time exchange of them for Gemini Dollar (GUSD) or other stablecoin.

Related: What is Chapter 11 bankruptcy? Understand the basics

According to the application, the amount of trade-only assets doesn’t exceed 0.5% of all US wallet assets of BlockFi users. Other trade-only assets, such as Cardano, Solana, Avalanche, etc. are being separately held by BlockFi International.

The Committee of BlockFi creditors, recognized by the Court, supported the company’s request.

In 2022, BlockFi became one of several companies that sought Chapter 11 bankruptcy protection in the US, along with FTX, Celsius Network, and Voyager Digital. In November 2022, it temporarily stopped clients from withdrawing funds. On Aug 16, the court authorized the company to open withdrawals for the first time in nine months.

The court has also conditionally approved BlockFi’s restructuring plan. The company prioritizes recovering funds from entities including Alameda Research, FTX, Three Arrows Capital, Emergent and Core Scientific. Last week, BlockFi’s legal team tried to block attempts by FTX to retrieve hundreds of millions of dollars to pay back their creditors.

According to estimates from April 2023, BlockFi owed up to $10 billion to over 100,000 creditors, including $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund 3AC.

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