BlockFi plans to generate enough value for creditors and conclude the Chapter 11 cases

• BlockFi crypto lender plans to liquidate its crypto lending platform to reimburse creditors.
• The lender has over $1.3 billion in debt owed to its top 50 creditors.
• It filed a Chapter 11 restructuring plan on May 12 in court, the same to be forwarded to creditors for voting.
• The case adds to the ongoing FUD cascade that continues to suppress the crypto market.

BlockFi crypto lender, now bankrupt, has resolved to liquidate its cryptocurrency lending platform on the grounds that this is the best way to generate enough value for its creditors.

We believe that our Plan is the fastest way for clients to receive the highest recovery of digital assets and conclude the Chapter 11 cases as quickly as possible.

Also Read: BlockFi in no immediate danger, despite Silicon Valley Bank exposure: Report

BlockFi Chapter 11 bankruptcy

The firm filed its Chapter 11 restructuring plan on May 12 with the United States Bankruptcy Court, after over $1.3 billion to its top 50 creditors. The plan would be forwarded to the creditors for voting purposes.

The firm, based in New Jersey, US, made the decision after determining that a sale may not be able to achieve significant value for creditors. Accordingly, BlockFi says it has been in talks with potential buyers since January, citing the recent regulatory concerns among the reasons why it has been unable to secure any good bids or offers.

As part of the bankruptcy proceedings, the crypto lender received authorization to return $297 million to some customers.

BlockFi hopes for $1B from litigation against other bankrupt firms

Nevertheless, the firm highlighted that the outcome of its pending legal tussle against hedge funds Alameda Research and Three Arrows Capital (3AC), crypto exchange FTX, and crypto miner Core Scientific would determine the amount that creditors will get.

According to BlockFi, successful legal action against the above counterparties will reduce what is owed to creditors by a huge margin.

[Successful litigation against all these counterparties] will make a huge difference of in excess of $1billion.

It is worth mentioning that all four companies have each filed for Chapter 11 bankruptcy protection. Based on company projections, there was approximately $1.6 billion in recoveries from multiple accounts. However, the lender also acknowledged that the actual recoveries could be notably different from the expected numbers.

Still, the most integral factor would be the success of the lender’s claims against the founder of the now-defunct crypto exchange FTX, Sam Bankman-Fried (SBF), and its corporate sister Alameda Research.

Reportedly, the firm has an outstanding loan of up to $671 million in crypto owed from Alameda Research, while $355 million worth of stock is owed to the FTX exchange.

Based on recent announcements, the court already determined that the crypto lender return $300 million to the actual wallet users, noting that these belong to the clients and not the bankruptcy estate. The judge also slated the hearing of the plan for a later date, around June 20.

  

Crypto market suffers burgeoning FUD

Meanwhile, the case adds to the ongoing Fear Uncertainty and Doubt (FUD) that continues to suppress the crypto market, preventing Bitcoin (BTC) price and the wider ecosystem from recording expected gains.

To put this in perspective, in an eventful day for crypto, the Bitcoin price also crashed when a crypto influencer posted that the US government’s Bitcoin wallet address was ‘on the move’, prompting fears that they were selling Silk Road seized coins.

The Bitcoin price then recovered soon after, when blockchain analysts and Twitter sleuths like @zachxbt noted the reports were false.

In the next few hours, the US Retail Sales report is expected to be out, and will influence the market to some level in the near term. 

Also Read: Could Bitcoin price soar in Q3 as BTC becomes retail traders preferred investment after Gold?