BlockFi’s Chapter 11 plan advances with court approval.

BlockFi's Chapter 11 plan advances with court approval.

Introduction

The blockchain industry is constantly evolving, and one of the latest developments is the ongoing reorganization of BlockFi, a major cryptocurrency lender. The company has made significant progress in its reorganization, with the United States Bankruptcy Court for the District of New Jersey conditionally approving its disclosure statement. This approval marks an important step towards resolving BlockFi’s Chapter 11 cases and facilitating the return of client funds.

Recovery Efforts and Client Opt-Outs

Once the bankruptcy plan receives final approval, BlockFi will focus on recovering funds from several defunct firms, including Alameda Research, FTX, Three Arrows Capital, Emergent, Marex, and Core Scientific. The primary objective is to optimize client recoveries while countering claims by third parties that could potentially dilute client assets.

To provide clients with additional protection, the proposed plan offers them the opportunity for releases if they don’t opt out of a voluntary third-party release. This release would exempt clients from all claims and causes of action that BlockFi may have against them. It is worth noting that this release applies to most clients, except those who withdrew $250,000 or more from BlockFi Interest Accounts (BIA) or BlockFi Private Client (BPC) Accounts on or after November 2, 2022.

Protection for Transferred Amounts

Under the approved plan, BlockFi will not reclaim amounts under $250,000 that clients properly transferred from BIAs or BPCs to BlockFi Wallet and subsequently withdrew from Wallet before the platform paused on November 10, 2022. This provision ensures that clients who followed the proper procedures and withdrew their funds in a timely manner will not face any additional claims from BlockFi.

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In addition, 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. These clients will receive a one-time cash distribution from the BlockFi estate equal to 50% of their claim. This measure aims to provide timely relief to clients with smaller claims and simplify the claims processing.

Collaboration with Regulators

BlockFi’s reorganization process has also seen positive developments in its collaboration with regulators. In June, the United States Securities and Exchange Commission (SEC) consented to delaying the collection of a $30 million fine from the bankrupt cryptocurrency lender until creditors are fully repaid. This delay allows BlockFi to prioritize the return of client funds and demonstrates a cooperative effort between BlockFi and regulatory authorities to ensure a fair and just resolution for all parties involved.

Conclusion

The ongoing reorganization of BlockFi showcases the resilience of the blockchain industry and the commitment to prioritizing client interests. By actively working to recover funds from defunct firms and implementing measures to protect clients’ transferred amounts, BlockFi aims to optimize client recoveries and prevent dilution of client assets. The conditional approval of the company’s disclosure statement by the United States Bankruptcy Court for the District of New Jersey signifies a significant step forward in resolving BlockFi’s Chapter 11 cases and facilitating the return of funds to clients. As the industry continues to evolve, this reorganization serves as a reminder of the importance of collaboration between blockchain companies and regulators to ensure the stability and trustworthiness of the ecosystem.

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