BlockFi Pending $300M Repayment
BlockFi is pending a $300 million refund to its customers. A court has now ruled that the funds belong to the users of the crypto lender. The service is among companies that went bust in the 2022 bear market.
BlockFi Pending $300M Repayment
Around 300 million US dollars should finally flow to the customers of the crypto lender BlockFi – that will be decided by a judge in the US state of New Jersey in the course of today’s negotiations.
BlockFi was hit particularly hard in 2022. The Jersey City-based crypto lender went bankrupt twice. In the summer of 2022, BlockFi lacked liquidity due to the ongoing bear market.
However, unlike its competitor Celsius, the company was able to find an investor – the second largest crypto exchange at the time, FTX. In return for a $400 million cash injection, FTX founder Sam Bankman-Fried was given the option to acquire BlockFi for a few million dollars.
In November 2022, the original sponsor finally became a burden on BlockFi himself. FTX collapsed and BlockFi went bankrupt. According to the latest decision of the bankruptcy court, the company is not allowed to keep a large part of the remaining facilities, as CoinDesk reports.
Presiding Judge Michael Kaplan has ruled that an additional $375 million will remain in the company’s hands. This money comes from the BlockFi Interest Accounts (BIA) . According to Kaplan, users of this offer should have reckoned with a risk.
The 300 million that flow back to customers, on the other hand, were only in BlockFI’s custody and did not generate any returns.
“The court finds that all digital assets held by debtors in custodial omnibus wallets are in fact customer property and not property of the estate, subject, of course, to possible rights of contestation and recovery.” So Chaplain.
The movement of funds has been suspended since November
As of November 10th, customers have not been able to move funds. Although the platform reported successful fund transfers from BIA to custody wallets, these have not actually taken place since then.
“BIA account holders have deposited their assets into these accounts knowing that they are taking certain risks in exchange for the opportunity for higher returns.” declares the judge.
Those who merely placed their cryptocurrencies in BlockFI custody “did not share that risk or return and should not allow their ownership to be diluted by those who took such risks”.
Attorney Deborah Kovsky-Apap sees it differently. As an employee of the law firm Troutman Pepper, she represents several BlockFi clients who used BIA accounts and are all claiming their money back.
According to Kovsky-Apap, the terms of use of the crypto lender are intentionally unclear and ambiguous in order to be able to profitably deceive any customers.
They argued that BlockFi’s promise of real-time payouts suggested that this is a mechanism triggered by the blockchain itself — such as staking on a proof-of-stake blockchain.
Already knew? Documents from the Celsius and BlockFi bankruptcy proceedings revealed that the Asian kingdom of Bhutan had been active as a crypto investor and Bitcoin miner for years .
