BlockFi Commits to Customer Repayment as Judge Kaplan Extends Support

Good news: BlockFi customers, the cryptocurrency lending platform, face financial troubles. A U.S. Bankruptcy Court in New Jersey has given the thumbs up to BlockFi’s plan to repay its customers. This means there’s hope that people who are owed money might start seeing some of it by the end of this year, as reported by Bloomberg. 

The green light for the liquidation plan came from Judge Michael Kaplan, who expressed his support for BlockFi’s proposal. The plan had the backing of a committee representing customer interests and supporting creditors. BlockFi had argued against FTX and Three Arrows Capital (3AC) receiving the funds they requested in bankruptcy court documents filed in August.

According to sources, Kaplan gave the green light to BlockFi’s third amended Chapter 11 plan during a September 26, 2023, hearing.  The approval for the liquidation plan came after BlockFi and the creditors committee settled their differences about possible legal issues involving the company’s top executives. It’s estimated that BlockFi has debts totaling as much as $10 billion, with a significant chunk of around $1 billion owed to its three biggest creditors and another $220 million to the bankrupt crypto hedge fund Three Arrows Capital.

BlockFi’s money troubles began when FTX had a major meltdown last year. The creditors claimed BlockFi’s management ignored warning signs before lending to FTX. This happened when cryptocurrency prices took a nosedive, causing chaos in the digital money world.

BlockFi got a lifeline from FTX through a $400 million credit deal to avoid going under. FTX could buy BlockFi for $240 million as part of that deal if certain performance goals were met.