Key Pointers:
- The US Bankruptcy Court in New Jersey has granted approval to BlockFi’s liquidation plan, a significant step towards repaying its 100,000-plus creditors.
- The extent of repayment for BlockFi’s unsecured creditors will depend on the outcome of its legal battle against FTX and other cryptocurrency firms.
A Crucial Milestone: US Bankruptcy Court Approves BlockFi’s Liquidation Plan
In a pivotal development, the United States Bankruptcy Court in New Jersey has granted approval to BlockFi‘s liquidation plan, marking a significant milestone for the platform’s 100,000-plus creditors who have anxiously awaited repayment.
Bankruptcy Judge Michael A. Kaplan provided the seal of approval for BlockFi’s third amended Chapter 11 plan during a court hearing on September 26, as indicated in filings on the same day. This endorsement sets the stage for the compensation of BlockFi’s unsecured creditors, the extent of which largely hinges on the outcome of BlockFi’s legal battle against FTX and other insolvent cryptocurrency entities.
The journey to this approval involved BlockFi submitting multiple amended liquidation plans, starting with the initial plan presented to the bankruptcy court on November 28. Subsequent amendments were filed on May 12, June 28, and July 31, according to court records.
Resolving Disputes and Finding Common Ground
BlockFi’s liquidation plan gained the court’s favour following the resolution of a protracted dispute with the creditors committee concerning the company’s senior management. A court filing dated September 25 revealed that the BlockFi creditors committee acknowledged that this settlement likely mitigated additional administrative fees and expenses, which might have diminished the potential recoveries.
It is worth noting that BlockFi attributed its insolvency to the collapse of FTX, despite the creditor’s committee expressing reservations about BlockFi’s ties to FTX and its former CEO, Sam Bankman-Fried. Current estimates suggest that BlockFi owes a substantial debt, amounting to as much as $10 billion, dispersed among over 100,000 creditors. This includes a significant debt of $1 billion to its three largest creditors and $220 million owed to the bankrupt crypto hedge fund, Three Arrows Capital.
BlockFi’s legal representation in these proceedings comes from the esteemed law firms Kirkland & Ellis LLP and Haynes and Boone LLP.
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