Bankrupt crypto lender Blockfi has filed a request with the court seeking authorization to sell its lending business in order to generate funds for repaying creditors. This decision comes after unsuccessful attempts to sell the lending platform to a third party, as BlockFi did not receive any offers that would maximize the value of the business.
On Friday, BlockFi submitted a Chapter 11 restructuring plan to the U.S. Bankruptcy Court in Trenton, New Jersey. While the firm intends to seek votes from creditors and retail customers, the plan is still subject to court approval.
Accordingly, the Debtors are proceeding with the Self-Liquidation Transaction whereby the Debtors will distribute their assets to creditors in accordance with the terms of the Plan, followed by a Wind Down of their affairs,” lawyers representing the bankrupt entity said.
BlockFi Looking to FTX Claims to Increase Client Recoveries
BlockFi, which filed for bankruptcy protection in November, cited regulatory changes as a factor that contributed to the lack of competitive bids from potential buyers. The company’s legal representatives stated that finalizing a transaction for the BlockFi Platform would not result in an expedient and value-maximizing outcome for the benefit of the creditors.
Additionally, the firm disclosed that the key factor driving recoveries for creditors and clients lies in the claims against its commercial counterparties, which include bankrupt crypto exchange FTX, Alameda Research, Three Arrows Capital (3AC), Emergent (Sam Bankman-Fried’s holding firm), and commodities broker Marex. These entities collectively owe BlockFi approximately $1 billion.
In a recent ruling, a U.S. judge determined that assets held in the company’s interest-bearing accounts do not belong to users who are attempting to reclaim them. As a result, the crypto lender has been instructed to cancel all pending transactions initiated by users in an effort to move the assets, following the company’s decision to halt withdrawals last year.