BlockFi Receives Court Authorization to Complete Full Repayment to Customers and Unsecured Creditors Following Nearly Two Years

BlockFi, the troubled cryptocurrency lending platform, has obtained court authorization to reimburse 100% of customer funds and unsecured creditors following nearly two years of financial distress and legal disputes.

The US Bankruptcy Court for the District of New Jersey has granted this authorization, representing a crucial step in BlockFi’s efforts to restore its customers’ assets.

BlockFi Secures Full Repayment Authorization

BlockFi has successfully received court approval to completely repay its customers and unsecured creditors, concluding a lengthy period of uncertainty.

The court’s ruling on Thursday permits the company to return 100% of customer assets, a development that comes after BlockFi’s filing to monetize $874.5 million in claims against FTX.

On July 25, 2024, BlockFi revealed it had sold its claims against FTX to a third-party claims buyer. This deal, part of a larger settlement, encompassed secured, unsecured, and customer claims executed at a premium over their nominal value.

This authorization paves the way for BlockFi customers to receive their full funds.

The company acknowledged on X the difficulties its customers faced due to the suspension of deposits and withdrawals in 2022.

BlockFi stated that while the recovery of assets cannot reverse the previous financial crisis, effectively distributing 100% of claim value to clients is an exceptionally favorable outcome.

While these recoveries cannot reverse the effects of the platform pause, efficiently distributing 100% of claim value to clients in the near future will be an exceptionally favorable outcome.

— BlockFi (@BlockFi) July 25, 2024

The company assured users that its Plan Administrator and Joint Liquidators are working with relevant authorities to facilitate a seamless distribution process for international customers.

This court approval signifies a modification in BlockFi’s distribution strategy. Earlier this month, the company announced a temporary distribution of crypto assets to eligible customers in July.

The assets will be allocated through Coinbase, and BlockFi has encouraged users to create a Coinbase account by August 23 to be eligible for digital asset distributions. Those without a Coinbase account will receive their assets in cash.

Concluded Settlement and Liquidation Strategies

BlockFi has achieved a notable settlement concerning its financial issues following the downfall of FTX.

The collapse of FTX in November 2022 had significant consequences for BlockFi, a prominent cryptocurrency lending service, which resulted in BlockFi filing for bankruptcy.

The ensuing legal and financial complexities between BlockFi and FTX were extensive and intricate.

Ken Aulet, the attorney representing the Plan Administrator, clarified the settlement in a statement to Cryptonews, indicating that the claims had been settled in March and sold at a premium. BlockFi customers are expected to receive 100% of the dollar value of their claims.

However, the increase in BTC and ETH values since the filing date means that customers receiving in-kind distributions will obtain less cryptocurrency than they initially deposited.

Distributions are anticipated to commence shortly after August 23, 2024, following BlockFi’s earlier $874.5 million settlement with the FTX and Alameda Research estates in March 2023.

Importantly, BlockFi is also in the process of liquidation. It will halt future operations while temporarily maintaining its legacy systems to assist with the liquidation and distribution processes.

In May 2024, BlockFi closed its web platform and announced plans to initiate temporary crypto distributions via Coinbase in July, with Kroll overseeing fiat claims.

However, non-U.S. clients may encounter additional verification requirements.

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