BlockFi, the cryptocurrency lender undergoing reorganization, has taken a significant step forward as the United States Bankruptcy Court for the District of New Jersey conditionally approved its disclosure statement.
The company released a joint statement with the Official Committee of Unsecured Creditors on August 2, 2023, urging all eligible parties to vote in favor of the plan before the September 11 voting deadline.
This approval is crucial as it will lead to the resolution of the Chapter 11 cases and the eventual return of client funds.
Once the bankruptcy plan obtains the necessary approval, BlockFi aims to focus on recovering funds from various defunct firms, including Alameda Research, FTX, Three Arrows Capital, Emergent, Marex, and Core Scientific.
The primary objective is to optimize the recovery of client funds while also countering potential claims by third parties that could dilute client assets.
The plan offers clients the option for releases if they don’t opt out of a voluntary third-party release.
This release would exempt them from any claims and causes of action that BlockFi might have against them.
However, this release does not apply to clients who withdrew $250,000 or more from BlockFi Interest Accounts (BIA) or BlockFi Private Client (BPC) Accounts on or after November 2, 2022.
Additionally, the plan stipulates that BlockFi will not reclaim amounts under $250,000 that clients properly transferred from BIAs or BPCs to BlockFi Wallet and subsequently withdrew from Wallet before the platform’s pause on November 10, 2022.
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Furthermore, clients with claims under $3,000 or those who choose to reduce their claim to $3,000 will be part of the convenience claim class and receive a one-time cash distribution from the BlockFi estate equal to 50% of their claim.
In another development, the United States Securities and Exchange Commission (SEC) has agreed to postpone the collection of a $30 million fine from BlockFi until creditors are fully repaid.
This fine constitutes the remaining balance of a $50 million settlement reached with the regulator in February 2022.
With the conditional approval of the disclosure statement, BlockFi is inching closer to resolving its bankruptcy cases and ensuring the return of funds to its clients.
The company urges all eligible parties to vote in favor of the plan before the voting deadline to move forward with the reorganization process successfully.
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