By
Tolu Ajiboye
May 10th, 2024
BlockFi’s eligible creditors can expect to receive a comprehensive Solicitation Package containing all the essential information for voting on the plan.
Beleaguered cryptocurrency lending company, BlockFi, has obtained conditional approval to proceed with its restructuring plan. On August 2, the United States Bankruptcy Court for the District of New Jersey partially approved the company’s disclosure statement. The company, which filed for Chapter 11 bankruptcy protection last year after the collapse of FTX, plans to prioritize the return of customers’ funds held on the platform when it suspended withdrawals in November.
According to an official press release, BlockFi’s Chapter 11 Plan, backed by both the company and the Official Committee of Unsecured Creditors, aims to bring the ongoing bankruptcy cases to a fair and value-optimizing conclusion.
Mark Renzi, representing BlockFi as the Chief Restructuring Officer from Berkeley Research Group, believes the crypto lender has come closer to returning customer funds.
“BlockFi’s mission through this process has been to maximize recoveries for our creditors, and conditional approval of our Disclosure Statement moves us one step closer to accomplishing that goal. We are confident that our plan provides the best path to expeditiously return crypto back to our clients, and we strongly urge BlockFi’s clients to vote to accept it.”
BlockFi Offers Customers Voluntary Third-Party Release
BlockFi urged its creditors to vote on the restructuring plan, which encompasses various elements with the primary objective of securely returning digital assets held in its wallet accounts to customers. The plan also includes a meticulous approach to returning non-Wallet assets to creditors.
Additionally, the company offers customers the option of a voluntary Third-Party Release, granting them relief from potential claims or actions pursued by BlockFi. The release, however, does not apply to customers who made substantial withdrawals exceeding $250,000 after November 2, 2022.
BlockFi introduced the Convenience Claim Class to protect clients with smaller claims as part of the plan, covering clients with claims under $3,000. Members of this class will receive a one-time cash distribution from the BlockFi Estate and a one-time payout of 50% of their claim in cash.
Suppose BlockFi’s Chapter 11 plan receives final approval from the court. In that case, the company plans to focus on pursuing claims and actions through litigation against other defunct firms, including FTX, its sister company Alameda Research, 3AC, Emergent, another FTX-owned firm, Three Arrows Capital (3AC), Marex, and Core Scientific. The outcomes of these intended legal proceedings could significantly impact the recoveries of BlockFi’s clients, potentially exceeding $1 billion.
BlockFi’s Restructuring Plan Faces Criticisms from the SEC
However, while the conditional approval of the disclosure statement marks a promising development in the company’s financial recovery, the plan faces criticisms from certain entities, including the US Securities and Exchange Commission (SEC), FTX, and 3AC.
In July, FTX filed a motion at the US Bankruptcy Court of New Jersey, claiming that the company’s restructuring plan is in violation of the bankruptcy rules.
The SEC has also raised concerns about the plan’s treatment of its claims, procedural fairness, and the potential absolution of BlockFi and its management from legal responsibility. These objections necessitate careful consideration and resolution before the final approval.
BlockFi’s eligible creditors can expect to receive a comprehensive Solicitation Package containing all the essential information for voting on the plan. To ensure their votes count, clients must submit them to the solicitation agent, Kroll, before September 11. BlockFi encourages all clients, regardless of voting eligibility, to diligently review the disclosure statement and accompanying materials before making decisions.