The dissatisfied creditors have lodged fresh complaints and submitted them to the court concerning the recent restructuring plan implemented by the BlockFi cryptocurrency lending platform.
In a filing with the United States Bankruptcy Court in Trenton, New Jersey, BlockFi outlined its Chapter 11 reorganization plan. BlockFi says that selling the cryptocurrency lending platform can’t guarantee full payment to creditors. The platform owes a staggering $1.3 billion to its top 50 creditors and may need more capital to cover the debts.
In response, the creditors of BlockFi leveled accusations against the lending platform, claiming that BlockFi deliberately caused delays in the trial proceedings. The creditors asserted that the platform intentionally prolonged the legal process.
Represented by the law firm Brown Rudnick, the creditors of BlockFi expressed in writing that the lending platform had sold approximately $240 million worth of crypto before filing for bankruptcy in late November 2022. The creditors highlighted that BlockFi had disposed of these assets “at the nadir,” referring to a significant market downturn following the collapse of FTX.
Furthermore, the creditors also pointed out “unnecessary and undesirable tax consequences” while highlighting that the amount generated from the sale was irrelevant to the company’s financial state in bankruptcy.
The document explicitly stated that the decision to sell $240 million worth of cryptocurrency lacked rational justification in fulfilling the funding requirements of the bankruptcy proceedings, as no reasonable estimation would indicate that the bankruptcy costs would reach $240 million.
The creditors emphasized that this transaction seemed disproportionate and unnecessary considering the bankruptcy circumstances. They called attention to the contradiction between the sale amount and the actual financial needs of the bankruptcy proceedings.
According to reports, BlockFi customers alleged that the crypto lending platform utilized around $22.5 million of customers’ funds to acquire a $30 million insurance policy. The customers claimed BlockFi took this action using their funds to secure the insurance policy.
This incident occurred shortly after BlockFi liquidated its digital assets but before its bankruptcy filing. During this timeframe, the crypto lending platform utilized customers’ funds amounting to approximately $22.5 million to purchase a $30 million insurance policy.
