BlockFi Complies with Court Order, Permits Crypto Withdrawals for Eligible US Users
On August 17, BlockFi, a New Jersey-based crypto lending company, stated that it had initiated withdrawals for eligible users' wallets in the US in compliance with a court order issued by the US Bankruptcy Court for the District of New Jersey.
However, due to ongoing legal proceedings, these withdrawals only apply to some wallets managed by international users.
"As authorized by the Court in the Wallet Order, at this time, eligible clients include U.S.-based BlockFi Wallet account holders who [...] did not withdraw or transfer more than $7,575 worth of digital assets from their BlockFi Interest Account (BIA) or BlockFi Private Client (BPC) on or after November 2, 2022 [and] did not hold any trade-only assets in their Wallet at the time of Platform Pause on November 10, 2022, at 8:15 P.M. ET," said BlockFi in its notice to users.
In late November, when BlockFi sought Chapter 11 bankruptcy protection due to FTX-related issues, it stated that the move is a crucial stride towards returning assets to clients through the Chapter 11 cases, the company said in a user communication.
The issues plaguing BlockFi are closely tied to the lifeline it received in July when FTX extended a $400 million credit facility. Yet, this bailout, now considered part of a series of unfavorable FTX deals, came with conditions: Bankman-Fried could acquire BlockFi for as little as $240 million the following year.
Following FTX's bankruptcy filing in the same month, BlockFi expressed surprise at the situation as they revealed that they, like the rest of the world, learned about the developments through Twitter.
BlockFi's Turbulent Journey: Bankruptcy Threats, Bailouts, and the Path to Recovery
In November 2022, BlockFi, the crypto lender facing bankruptcy, ceased client withdrawals and initiated motions to return user funds in December of the same year.
However, shortly after assuring users of its full functionality, BlockFi, the crypto lender bailed out by FTX earlier that year, abruptly suspended withdrawals. The company cited operational challenges related to FTX.com, FTX US, and Alameda Research as the causes.
"After FTX's downfall, BlockFi's management and board swiftly acted to safeguard clients and the company," commented Mark Renzi from Berkeley Research Group, the firm's financial advisor.
"From the start, BlockFi aimed to impact the cryptocurrency realm and drive progress positively. The forthcoming process strives for transparency and the best outcomes for all clients and stakeholders."
In May 2023, BlockFi's creditors received pleasing news. Customers were notified via email that BlockFi had gained court approval on May 17th to update user interfaces. This update was a necessary measure to enable fund withdrawals.
According to screenshots of the email shared on Twitter, BlockFi stated, "We anticipate that this work and the necessary testing will be completed by this summer. At that time, we can begin making distributions to clients."
Finally, on August 16, a court order was issued by the US Bankruptcy Court for the District of New Jersey, granting BlockFi legal permission to initiate withdrawals after a nine-month break.
Numerous users of X have already confirmed their ability to retrieve their funds, although some international users have expressed continued ineligibility.
Also, BlockFi announced on August 2 that the bankruptcy court had provisionally sanctioned its reorganization strategy, focusing on reclaiming funds from entities such as Alameda Research, FTX, Three Arrows Capital, Emergent, and Core Scientific.
Concurrently, the lending company is facing a $30 million penalty from the US Securities and Exchange Commission (SEC). The regulator has postponed this fine's collection until BlockFi's users are duly reimbursed.