Bankrupt crypto lender BlockFi wants customers enabled to withdraw funds

• BlockFi asks the court to allow customers to withdraw their crypto assets because the company has "no legal or equitable interest."
• BlockFi requests to delete unprocessed withdrawal petitions after the suspension on November 12.
• Former FTX CEO Sam Bankman-Fried agrees to his extradition to the US to make thighs right with customers.

BlockFi is seeking approval from a United States court to allow customers to withdraw funds locked on the platform since November 10. Monday's court filing indicates that the funds legally belong to customers and the company does not have "legal or equitable interest." BlockFi's request occurred barely a day before FTX's former CEO Sam Bankman-Fried agreed to be extradited to the United States.

BlockFi intends to honor customer withdrawals

The motion filed with the US Bankruptcy Court in the District of New Jersey cited BlockFi's "Wallet Terms of Service," stating that crypto assets "held in your BlockFi Wallet shall at all times remain with you and shall not transfer to BlockFi."

WOW, @BlockFi has already filed a motion requesting client withdrawals for assets held in BlockFi Wallet Accounts. S/O to BlockFi for moving exponentially more quickly than @CelsiusNetwork in Ch 11. pic.twitter.com/JvtWzMklNA

— Tiffany Fong (@TiffanyFong_) December 20, 2022

BlockFi stressed that debtors do not have any "legal or equitable interest in cryptocurrency that was present in the wallet accounts of the platform." The company added in the filing that "clients should be able to withdraw such assets from the platform if they choose."

The matter is currently in court and has been scheduled for a hearing on January 9. There will be a second hearing on January 13 dedicated to wallet accounts in the custody of BlockFi International, a subsidiary that handled non-US operations domiciled in Bermuda.

FTX's Bankman-Fried nods to United States extradition

Sam Bankman-Fried (SBF), the founder and former CEO of FTX, has accepted his extradition to the United States, where he is expected to face money laundering and fraud charges. SBF has been in the custody of Bahamian authorities since his arrest early last week.

Despite the nod to his extraction, it has yet to be discovered when Sam Bankman-Fried will depart the Bahamas for the US. The court did not set a further date on the matter.

Still, on FTX, the team overseeing the firm's bankruptcy proceedings is working around the clock to recover millions of Dollars in donations made by SBF to politicians.

The team, led by John Ray III, says that some politicians and other recipients of FTX's funds are reaching out for directions on how to return the funds.

It has been reported before that Sam Bankman-Fried made up to $46.5 million in political donations in the months leading to the liquidity crisis at FTX. Currently, the bankrupt exchange is working with the recipients for a voluntary return of these contributions. However, it will soon start legal action through the bankruptcy court to ensure all funds are returned.

FTX filed for bankruptcy on November 12 after the exchange had a liquidity crisis due to overwhelming withdrawal requests. An article published by CoinDesk on November 2 revealed that Alameda Research, FTX's trading arm, owned a significant amount in FTT, a token issued by the exchange.

The article triggered cascading events with Binance announcing its intent to liquidate FTT holdings. FTX was forced to file for bankruptcy after Binance pulled out of a deal to acquire the company as a way of protecting customers. The collapse of FTX continues to weigh down the crypto market, with centralized exchanges like Binance coming into the spotlight on how they handle customer deposits.

---