BlockFi Bankrupt and to Liquidate Crypto Lending Platform

BlockFi Bankrupt and to Liquidate Crypto Lending Platform

Altcoin news, News

The crypto lending platform, BlockFi has announced that it will liquidate its operations including its crypto lending platform as it failed to generate value from a potential sale amid ongoing bankruptcy proceedings. The New Jersey-based firm had debts owed to its top 50 creditors amounting to over $1.3 billion. To restructure its bankruptcy plan, BlockFi has filed Chapter 11 with the US Bankruptcy Court, which will be voted on by its creditors after review.

BlockFi had been attempting to sell its lending platform for several months but was unsuccessful in finding a buyer that would offer terms that would be acceptable, partly due to regulatory concerns. Thus, it has now opted to liquidate its platform instead. During the bankruptcy proceedings, the company has allowed the refund of $297 million to some clients.

The company’s ongoing lawsuit against Alameda Research, FTX, Three Arrows Capital, and Core Scientific could potentially bring in over $1 billion for its clients, which BlockFi sees as a solution to its financial troubles. If BlockFi successfully wins this lawsuit, it could potentially be a crucial factor for its creditors.

The bankrupt lender noted that its creditors would primarily receive funds based on the result of the aforementioned lawsuit. Although BlockFi had anticipated to obtain $1.6 billion from different accounts, it clarified that the actual recoveries could significantly differ from the projections.

BlockFi has outstanding loans of $671 million in cryptocurrency and $355 million in stock on the FTX exchange to Alameda Research. Winning the lawsuits against Alameda Research and FTX, both founded by Sam Bankman-Fried, is crucial for BlockFi to generate further financial returns.

The court has reportedly ordered BlockFi to return almost $300 million to its custodial wallet users, claiming that the funds belonged to clients rather than the bankruptcy estate. A hearing to discuss the company’s plan is scheduled for June 20th.

Compiled by Coinbold