Crypto lending company BlockFi, which had faced financial challenges, has taken a step forward in its fund recovery process.
Seeking approval from the United States Bankruptcy Court for the District of New Jersey, BlockFi has requested the transfer of “trade-only” assets from users’ accounts into stablecoins, enabling users to withdraw their funds.
These assets, including Algorand’s native token, Bitcoin Cash, and Dogecoin, have posed withdrawal difficulties.
To address this, BlockFi proposes a one-time conversion into stablecoins like Gemini Dollar (GUSD).
The application clarifies that these trade-only assets constitute less than 0.5% of the total U.S. wallet assets of BlockFi users.
Meanwhile, other trade-only assets like Cardano, Solana, and Avalanche are being held separately by BlockFi International.
Importantly, the request has received the backing of the committee of BlockFi creditors, a body recognized by the court.
Having filed for Chapter 11 bankruptcy protection in 2022, BlockFi joined other companies like FTX, Celsius Network, and Voyager Digital in facing financial turmoil.
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Last year, client fund withdrawals were temporarily suspended, but on August 16, the court granted permission for withdrawals after a nine-month hiatus.
The court has also provisionally endorsed BlockFi’s restructuring strategy.
The company’s focus is on recuperating funds from key entities such as Alameda Research, FTX, Three Arrows Capital, Emergent, and Core Scientific.
Notably, a recent legal move by BlockFi sought to prevent FTX from retrieving substantial funds to repay its creditors, marking the ongoing complexities in the process.
As of April 2023 estimates, BlockFi’s debt reached up to $10 billion, owed to over 100,000 creditors.
Among them, the three largest creditors were owed $1 billion collectively, while the defunct crypto hedge fund 3AC was owed $220 million.
In summary, BlockFi’s application to transfer trade-only assets into stablecoins is a significant stride towards refunding users.
Supported by a recognized creditors’ committee, this move aligns with BlockFi’s ongoing efforts to navigate its financial challenges and meet its debt obligations.
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