After one year, FTX’s “institutional victim” BlockFi completed bankruptcy and reorganization

23-10-25 12:29
Read this article in 17 Minutes
总结 AI summary
View the summary 收起
Content Directory:
· BlockFi's dealings with FTX lead to bankruptcy
· BlockFi has been applying for bankruptcy restructuring for nearly a year
· Genesis will also face bankruptcy


BlockBeats News, on October 25th, cryptocurrency lending company BlockFi announced the successful completion of its bankruptcy proceedings and the implementation of its bankruptcy plan. BlockFi will begin implementing measures outlined in the plan, including repaying creditors according to plan terms, making efforts to recover assets from FTX, 3AC, and other companies, distributing digital assets to customers, and ensuring fair and equitable distribution of customer rights. For Wallet customers, they can now withdraw funds. BIA and loan customers of BlockFi will begin receiving their first distribution in early 2024.



BlockFi and FTX's mutual interests lead to bankruptcy


Celsuis and Three Arrows Capital's defaults have affected many other institutions. In the face of two major institutions defaulting in succession, SBF earlier stated in an interview with NPR that he had indeed considered intervening to prevent the crisis from spreading, which would be healthier for the crypto ecosystem. After liquidating Three Arrows Capital's collateral, BlockFi announced on June 21, 2022 that it had obtained a $250 million revolving credit facility from FTX trading platform.


SBF wrote on Twitter: "BlockFi has cautious risk management and excellent situational leadership, which is why they are able to identify counterparty risk and liquidate positions in advance. BlockFi's user assets are well managed and there are no debt risks from Three Arrows, Celsius, etc."


Related reading: "SBF aids BlockFi: We must stop the crisis from spreading even if it means losing some money".


However, it was precisely the financial entanglement with FTX that led to BlockFi's bankruptcy filing on November 28th of last year, making it the latest large digital asset company to go bankrupt since FTX. BlockFi's creditors blamed CEO Zac Prince and other executives for the failure, and in a newly unsealed report, they rejected warnings from the risk management team not to issue large loans to SBF's Alameda Research, which were collateralized with FTT.


According to documents submitted by the company to the US Bankruptcy Court in Trenton, New Jersey, only the company's top ten creditors are owed nearly $1.2 billion in debt, and the total amount of debt may be much larger.


Related reading: "BlockFi has applied for bankruptcy restructuring, with creditors exceeding 100,000 [updated on November 30th]".


After applying for bankruptcy reorganization, the "court battle" between BlockFi and SBF continues to this day.


At the beginning of this year, BlockFi officially announced that it would submit its balance sheet and financial statements to the court on January 11, 2023. However, the financial statements showed that FTX's loan caused BlockFi executives to lose $800 million in equity, and the CEO withdrew $9 million for tax purposes. Three days later, revised financial statements showed that the bankrupt crypto lending institution BlockFi has over $1.2 billion in assets related to SBF's FTX and Alameda Research, including $415.9 million in assets related to FTX and $831.3 million in loans provided to Alameda.


Regarding this, BlockFi denies the claim of having "secret financial data" and states that transparency has always been a top priority throughout the bankruptcy protection process, and accurate information has been disclosed to the New Jersey bankruptcy court. In order to compete for the approximately $600 million in assets owned by SBF, BlockFi requests that the court dismiss the bankruptcy petition of Emergent Fidelity Technologies, a shell company owned 90% by SBF, and states that the success or failure of the claims against FTX and Alameda will make a difference of over $1 billion for customers waiting to retrieve their funds.


On June 28th, BlockFi creditors filed for liquidation of BlockFi, alleging that the management, including CEO Zac Prince, had been delaying the bankruptcy process and engaging in fraudulent behavior. However, according to a legal document submitted by FTX on July 5th, BlockFi's proposal abused bankruptcy rules and involved disputed transactions worth over $1 billion.


BlockFi plans to hold a hearing in New Jersey on July 13th, but it has been opposed by Three Arrows Capital and the SEC. Therefore, on July 12th, BlockFi reached a potential legal settlement with co-founders Zac Prince and Flori Marquez and other management regardingclaims. The management has agreed to assist the company's lawyers in taking action against FTX and Three Arrows Capital, and the BlockFi management will serve as key witnesses in lawsuits involving FTX and Three Arrows, potentially recovering $1 billion in assets for creditors.


However, BlockFi claims to be a victim of FTX and therefore FTX has no right to claim more than $5 billion. In addition, BlockFi accuses Three Arrows Capital of using fraudulent means to borrow from it and has no right to demand repayment. In SBF's trial, BlockFi CEO Zac Prince testified on October 13th that FTX and Alameda Research were the culprits that caused BlockFi's bankruptcy. If he knew that the balance sheet contained false information, he would never have lent money to FTX. Prince told prosecutors that BlockFi had a total of $1.1 billion on FTX, and currently has $650 million outstanding.


FTX opposes BlockFi's bankruptcy planproposedand argues that it "still has some fundamental flaws". FTX's lawyers believe that "the plan unfairly discriminates against FTX's claims in some respects" and have requested that the court reject the plan.


BlockFi applies for bankruptcy restructuring for nearly a year


BlockFi filed for bankruptcy on November 28th last year. According to court documents, on January 31st of this year, the bankruptcy court in New Jersey, USA, approved BlockFi's sale of its cryptocurrency mining equipment as part of its debt repayment to creditors. The court stated that the sale of assets can maximize the company's recovery and "realizable value".


On February 14th, BlockFi released a statement stating that BlockFi customers will receive important information regarding the claims process proof from Kroll, BlockFi's investigation and risk consulting company, via mail and/or email starting today. On May 16th, BlockFi requested that the bankruptcy court allow it to begin liquidating the loan platform and distributing funds to creditors. However, a correction letter released by BlockFi shows that creditors and other parties do not support BlockFi's restructuring plan.


On June 13th, BlockFi is expected to allow some customers to withdraw funds starting this summer after completing necessary testing and preparations. Any withdrawals must be done in batches, and eligible individuals will receive an email from the company. BlockFi recommends that users set up third-party wallet withdrawals. On the 23rd, the US Securities and Exchange Commission (SEC) agreed to waive the $30 million fine for the bankrupt crypto lending platform BlockFi that had applied, in order to maximize and expedite repayment to investors.


BlockFi and its affiliated companies have announced that their bankruptcy plan disclosure statement has received conditional approval from the New Jersey Bankruptcy Court and will take effect on August 2. The plan aims to help customers recover their funds to the maximum extent possible and provide them with the fastest possible return of their funds. The Chapter 11 bankruptcy plan's solicitation period will begin on August 16, during which all eligible creditors will be able to vote on BlockFi's bankruptcy plan. At the end of the month, BlockFi applied to the court to transfer the limited trading assets in users' accounts to stablecoins so that individuals can withdraw these assets.


On September 27th, Judge Michael A. Kaplan of the United States Bankruptcy Court approved the liquidation plan of the bankrupt cryptocurrency lending company BlockFi. The compensation amount for BlockFi's unsecured creditors will largely depend on whether BlockFi wins in legal disputes with FTX and other bankrupt cryptocurrency companies. On the 30th, according to an email sent by BlockFi to creditors on Friday, BlockFi's creditors approved its bankruptcy restructuring plan, clearing one of the final obstacles in the months-long process of winding down the company's business and repaying customer funds.


Today, BlockFi announced the successful completion of its bankruptcy proceedings and the implementation of its bankruptcy plan. On the other hand, FTX is negotiating with three undisclosed bidders to restart its trading platform. According to Lookonchain monitoring, FTX and Alameda Asset Receiver Wallet transferred 2904 ETH (approximately $5.18 million), 1341 MKR (approximately $2.02 million), 11,974 AAVE (approximately $1.03 million), and 198,804 LINK (approximately $2.26 million) to Binance and Coinbase through the wallet address starting with 0xde9A. The total value of these assets is approximately $10.49 million.



Genesis is also facing bankruptcy


October 25th, according to Reuters, cryptocurrency lending company Genesis Global stated that due to a civil fraud lawsuit brought by New York State Attorney General Letitia James against Genesis Global, its parent company Digital Currency Group (DCG), and former partner Gemini Trust Co, the company may be forced to undergo bankruptcy liquidation that does not involve its claim against DCG.


Genesis Global announced bankruptcy and has close ties with companies such as FTX, Three Arrows Capital, and BlockFi. FTX accused the cryptocurrency lending institution Genesis of owing up to $3.9 billion, which Genesis denied. Later, this amount was reduced to $2 billion. On August 17th, FTX and Genesis Global reached an agreement, and Genesis will pay $175 million to Alameda Research. Genesis also agreed to drop all other claims against FTX.



欢迎加入律动 BlockBeats 官方社群:

Telegram 订阅群:https://t.me/theblockbeats

Telegram 交流群:https://t.me/BlockBeats_App

Twitter 官方账号:https://twitter.com/BlockBeatsAsia

Choose Library
Add Library
Cancel
Finish
Add Library
Visible to myself only
Public
Save
Correction/Report
Submit