BlockFi Users To Get Back $297M From Wallet Accounts
A U.S. judge has granted permission for bankrupt crypto lender BlockFi to return $297 million to customers with deposits held in its Wallet program. The return of funds does not apply to BlockFi Interest Accounts (BIA) users, as funds in BIA accounts were used by BlockFi for its lending business. This means the funds will be later used to repay all creditors.
Wallet program users to receive refunds
BlockFi filed for Chapter 11 bankruptcy protection in November, following days of speculation about its financial health after the collapse of FTX. At that time, the crypto lender had $256.9 million in liquidity and owed over 100,000 creditors an estimated $10 billion. The company sought to sell its crypto mining equipment and $160 million in Bitcoin-backed loans to repay its creditors.
The return of funds from the Wallet program will provide some relief for users. Nearly 48,000 BlockFi clients tried to transfer $375 million from their BIA accounts to Wallet accounts on November 11 after the company froze services following the FTX collapse. BIA users who attempted to transfer funds to wallets will not get a refund at this time, the judge also ruled.
BlockFi’s terms of service allowed it to block transaction requests during the shutdown. Lawyers for the affected customers argued that BlockFi should also refund their transfers. However, Judge Kaplan upheld the lender’s right to block such transactions, given the terms of service.
Exit plan to be submitted
BlockFi should submit its bankruptcy exit plan by May 15. According to its lawyer, Joshua Sussberg, BlockFi is exploring a potential sale of its assets or the possibility of finding an outside backer to support a restructuring deal. The company is also facing a $30 million debt with the U.S. Securities and Exchange Commission. Court documents showed West Realm Shires Services Inc. (doing business as FTX US) at the top of the creditors’ list.