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 in New Jersey has conditionally approved its disclosure statement.

BlockFi and the Official Committee of Unsecured Creditors jointly issued an announcement on August 2, 2023, urging all eligible parties to vote in favor of accepting the Plan by the September 11, 2023, 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 its efforts on recovering funds from several other defunct firms, including Alameda, FTX, 3AC, Emergent, Marex and Core Scientific. The primary aim is to optimize recoveries for clients while also 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 Accounts (BPC) on or after November 2, 2022.

Furthermore, under the Plan, BlockFi will not reclaim amounts under $250,000 that clients properly transferred from BIA or BPC to Wallet and/or withdrew from Wallet before the Platform Pause on November 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. Creditors in this class will receive a one-time cash distribution equal to 50% of their claim.

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

Earlier in June, the United States Securities and Exchange Commission (SEC) 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 back in February 2022.

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