The bankrupt crypto lender’s request marks another step toward the return of users’ funds, which the company began in August.
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Defunct crypto lending firm BlockFi has applied to a court to request the transfer of “trade-only” assets from its users’ accounts into stablecoins so the individuals could withdraw them. The request marks another step toward the return of users’ funds, a process that the company began in August.
On Aug. 29, BlockFi filed an application to the United States Bankruptcy Court for the District of New Jersey to authorize the conversion of the so-called trade-only assets into stablecoins. The assets in question — Algorand’s native token, ALGO, Bitcoin Cash (BCH) and Dogecoin (DOGE) — cannot be withdrawn easily, and BlockFi suggests a one-time exchange for Gemini Dollar (GUSD) or another stablecoin.
Related: What is Chapter 11 bankruptcy? Understand the basics
According to the application, the amount of trade-only assets doesn’t exceed 0.5% of all U.S. wallet assets of BlockFi users. Other trade-only assets, such as Cardano (ADA), Solana (SOL), Avalanche (AVAX) and others, are being separately held by BlockFi International.
The committee of BlockFi creditors, recognized by the court, supported the company’s request.
In 2022, BlockFi became one of several companies that sought Chapter 11 bankruptcy protection in the U.S., along with FTX, Celsius Network and Voyager Digital. In November 2022, it temporarily stopped clients from withdrawing funds. On Aug. 16, the court authorized the company to open withdrawals for the first time in nine months.
The court has also conditionally approved BlockFi’s restructuring plan. The company prioritizes recovering funds from entities including Alameda Research, FTX, Three Arrows Capital, Emergent and Core Scientific. On Aug. 21, BlockFi’s legal team tried to block attempts by FTX to retrieve hundreds of millions of dollars to pay back its creditors.
According to estimates from April 2023, BlockFi owed up to $10 billion to over 100,000 creditors, including $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund 3AC.
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