BlockFi Clears Major Hurdle in US Bankruptcy Court

BlockFi, the bankrupt crypto lender, recently announced that the US Bankruptcy Court for the District of New Jersey has conditionally approved its disclosure statement. This marks a significant step in BlockFi’s reorganization process, which has been underway for eight months since the company filed for relief under Chapter 11 of the United States Bankruptcy Code.

In an official statement on August 2nd, Mark Renzi, BlockFi’s Chief Restructuring Officer, emphasized the lender’s commitment to maximizing recoveries for its creditors. He expressed his satisfaction with the conditional approval of the Disclosure Statement, stating that it brings BlockFi “one step closer to accomplishing that goal.”

Renzi urged BlockFi’s clients to support the plan, believing it offers the best route to efficiently return crypto assets to the clients. The company’s focus, if the bankruptcy plan is approved, will be on recovering funds from other defunct firms, such as Alameda, FTX, 3AC, Emergent, Marex, and Core Scientific. This effort is aimed at maximizing recoveries for clients and defending against claims by third parties that could significantly dilute clients’ assets.

However, not everyone is on board with the proposed bankruptcy plans. The disgraced crypto exchange FTX, the fallen hedge fund Three Arrows Capital (3AC), and the Securities and Exchange Commission (SEC) have expressed strong opposition to the plan.

The proposed bankruptcy plan provides clients with the option for releases, allowing them to avoid withdrawing from a voluntary third-party release, which would absolve them from any claims and causes of action that BlockFi may have against them. This release is applicable for 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.

The scheduled date for voting on the proposed reorganization plan is September 11, when the fate of BlockFi’s restructuring efforts will be determined.

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