Bankruptcy Judge Michael A. Kaplan has approved BlockFi’s third amended Chapter 11 plan during a court hearing on September 26, according to a filing on the same date. The development brings customers of the embattled cryptocurrency lending platform closer to receiving their payments after the United States Bankruptcy Court in New Jersey endorsed its liquidation plan.
Meanwhile, the extent of reimbursement to BlockFi’s unsecured creditors will largely depend on the outcome of BlockFi’s legal dispute with FTX and other bankrupt cryptocurrency companies.
BlockFi approved liquidation plan
BlockFi initially submitted its first liquidation plan to the bankruptcy court on November 28. Nevertheless, subsequent amendments were required, leading to the filing of the first, second and third revised plans on 12 May, 28 June and 31 July respectively. For court records.
After a prolonged dispute with the creditors’ committee regarding the company’s senior management, BlockFi’s liquidation plan has finally been approved. Judge Kaplan noted that challenges from the U.S. Department of Justice’s bankruptcy oversight body and other stakeholders related to the legal releases benefiting BlockFi’s senior managers outlined in the liquidation plan will be dismissed.
In a court filing on Monday, the committee acknowledged that BlockFi’s bankruptcy proceedings have been contentious at times. However, he stressed that the agreement helped avoid administrative costs that could have reduced customers’ recoveries.
The committee said that despite facing various hurdles during the Chapter 11 case, BlockFi can now expedite customer payments compared to other bankrupt crypto firms. He also expressed hope that payments to BlockFi creditors could begin within the current year.
Estimates suggest that BlockFi owes up to $10 billion in outstanding debt to more than 100,000 creditors. This includes $1 billion from its three largest creditors and $220 million from bankrupt crypto hedge fund, Three Arrows Capital.
BlockFi’s bankruptcy saga
BlockFi halted client withdrawals on November 10, just before the collapse and subsequent bankruptcy of FTX. When BlockFi filed for Chapter 11 later that month, the cryptocurrency lending platform initially aimed to restructure its operations.
However, earlier this year it concluded that liquidation would be the most effective means of getting customers paid. The platform blamed the collapse of FTX for its collapse despite the creditors committee expressing reservations about BlockFi’s association with the exchange and its former CEO Sam Bankman-Fried.
FTX later objected to BlockFi’s bankruptcy plan, arguing that it still suffered from some fundamental shortcomings. FTX’s legal team argues that the scheme demonstrates unfair treatment to FTX Claims in specific aspects and has petitioned the court to have it dismissed.
In the filing, the exchange argued that the debtors of both BlockFi and FTX had attempted to collaboratively address the complex issues between the parties arising from “debtor debtor” claims in a fair and efficient manner.
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