BlockFi inching closer to customer refunds, locks down conditional court approval

BlockFi’s disclosure statement was conditionally approved by a bankruptcy court, meaning that the bankruptcy plan advances to a vote with a deadline of Sept. 11.

The bankrupt lender’s newest plan would return non-wallet funds back to customers, and the company would not “clawback amounts under $250,000 that clients properly transferred from [BlockFi interest accounts] or [BlockFi private client accounts] to Wallet.”

The BlockFi estate would also group customers with claims under $3,000 in a “convenience claim class” and pay them out with a lump sum of 50% of the total claim. 

BlockFi will continue to push forward on its attempted clawback of funds from companies such as FTX and Three Arrows Capital.

“BlockFi’s mission through this process has been to maximize recoveries for our creditors, and conditional approval of our Disclosure Statement moves us one step closer to accomplishing that goal,” said Mark Renzi, BlockFi’s chief restructuring officer. 

“We are confident that our Plan provides the best path to expeditiously return crypto back to our clients and we strongly urge BlockFi’s clients to vote to accept it.” 

However, the statement has previously received pushback. FTX, Three Arrows Capital and the Securities and Exchange Commission — which opted to forego its $30 million penalty against BlockFi until customers are repaid — have objected to the plan, with FTX going so far as to argue that the disclosure statement failed to meet bankruptcy code requirements.

Three Arrows Capital argued that the disclosure statement, in regards to “significant disputed claims…failed to provide creditors adequate information to make their own judgment on the viability of the Debtors’ strategy.”

The SEC claimed the statement “fails to disclose which parties and claims are being released and what consideration the released parties have tendered in exchange for the releases” and asked for more “detailed information” on the releases.

Earlier this summer, BlockFi’s committee of unsecured creditors pushed for a Chapter 11 trustee outside its bankruptcy plan after claiming that the debtors “broke their own promises to customers by liquidating nearly $240 million in customers’ crypto.”

They also claimed that former CEO Zac Prince, alongside BlockFi, “perpetrated a fraud on customers.”

Another report in July also found that BlockFi’s “demise was rooted in business practices and decisions well preceding.”

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