BlockFi Exits Bankruptcy, Customer Repayments to Begin Soon!

After grappling with the fallout of FTX’s collapse for nearly a year, BlockFi has officially announced its successful return from bankruptcy. The company is committed to executing the strategies laid out in its bankruptcy plan.

Here, we’ll trace this financial rollercoaster, how they reclaimed their stability and the broader implications for the industry. Read on!

A Fresh Start!

With its reorganization plan approved, BlockFi can now focus on repaying creditors and customers. The financial troubles arose due to BlockFi’s connection with the troubled FTX exchange and the hedge fund, Three Arrows Capital.

“BlockFi is pleased to announce that its bankruptcy plan (the “Plan”) is effective, and the company has emerged from bankruptcy as of October 24, 2023.”

Not all is smooth though…

However, the path to recovering assets may not be straightforward. FTX and Three Arrows Capital are currently navigating their own bankruptcy proceedings, making the asset recovery process complex and potentially contentious.

“Further updates on timing for this initial distribution will be sent in the coming months. We are aiming to begin initial distributions in early 2024. Any subsequent distributions will be dependent on many factors, including most notably any recoveries from FTX and its affiliates,” the announcement read. 

The Dramatic Fall of FTX

Before the collapse of FTX and its subsequent bankruptcy in November 2022, BlockFi had acquired FTX stablecoins worth hundreds of millions. The downfall of Sam Bankman-Fried’s empire had a cascading effect, leading to BlockFi’s insolvency, along with other crypto lenders like Celsius Network and Voyager Digital, both of which filed for bankruptcy last year amidst industry turmoil.

According to an official blog post, BlockFi is now authorized to take several critical steps as part of its approved plan. These steps include ensuring the accuracy of claims and the fair distribution of funds to clients.

BlockFi and FTX

BlockFi had a significant lending relationship with FTX. Its initial bankruptcy claim indicated a debt of $275 million to FTX. However, later developments revealed that BlockFi had assets and loans totaling $1.2 billion with FTX and Alameda. In broader terms, BlockFi’s bankruptcy filings suggest that the company owes as much as $10 billion to at least 100,000 creditors and former customers.