Bankrupt cryptocurrency lender BlockFi has been permitted by a US judge to refund $297m to its customers who hold deposits in the Wallet program. The return of funds will only apply to users of the Wallet program, not those with BlockFi Interest Accounts (BIA).
Refunds will only apply to users with BlockFi’s wallet program
Funds held in BIA accounts were used for lending purposes and are therefore considered the property of the estates. The said funds would be used to repay all creditors.
Those involved in the program did not take interests on their deposits, which was kept separate from other funds. BIA users who tried to transfer funds to wallets will not be eligible for the refunds.
Nearly 48,000 BlockFi clients attempted to transfer $375m from their BIA accounts to Wallet accounts on November 11, following the company’s freeze on services after the collapse of FTX.
The firm mentioned that it did not remove the transfer options from its end, allowing users to make transactions between accounts and even receive email confirmations.
However, those transactions were disabled on BlockFi’s back end, meaning they could not be completed. Legal representatives of those affected have argued that BlockFi should refund their clients as well.
The firm continues to look for ways to pay investors
BlockFi filed for bankruptcy protection in November 2022, following days of debate about its financial condition after the FTX crisis. During tge period, the lender had $256.9m in liquidity.
Court documents showed former FTX US was at the top of the list of creditors of the firm. Others included a debt owed to the US SEC worth $30 million.
The company sought to sell its crypto mining equipment and $160m in Bitcoin-backed BTC loans to repay its creditors. BlockFi owes over 100,000 creditors an estimated $10bn.
The firm is required to submit its exit plan by May 15. According to its lawyer, Joshua Sussberg, BlockFi is exploring a potential sale of its assets or finding an outside backer to support a restructuring deal.
