BlockFi: the crypto service provider proceeds with Chapter 11 plan

The bankrupt crypto service provider, BlockFi, is proceeding with its Chapter 11 plan, urging those eligible to vote for acceptance by 11 September 2023. This will make it easy for the company to proceed with the return of customer funds.  

BlockFi: failed crypto company moves forward with its Chapter 11 plan

According to the joint statement released by BlockFi and the official Committee of Unsecured Creditors, it appears that the bankrupt crypto service provider is moving forward with its Chapter 11 plan. 

This declaration has been conditionally approved by the US Bankruptcy Court for the District of New Jersey and plans to maximize recovery for customers and provides for the fastest possible distribution to customers.

Specifically, BlockFi is urging all claimants to vote to accept the Chapter 11 plan by the deadline of 11 September 2023. This will make it easier to provide for the return of customers’ funds. 

In this regard, Mark Renzi of Berkeley Research Group, Chief Restructuring Officer of BlockFi said: 

“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.”

Not only that, once the bankruptcy plan is approved, BlockFi also said it will want to focus on recovering funds from other failed companies, such as Alameda Research, FTX, Three Arrows Capital, Emergent, Marex, and Core Scientific. 

In this way, the company aims to optimize client recoveries while countering third-party claims that could significantly dilute clients’ assets.

BlockFi: How is the failed crypto company’s Chapter 11 plan organized?

The plan unveiled by the crypto service provider would offer customers who do not opt for a voluntary third-party release the opportunity to obtain a release exempting them from all claims and causes of action BlockFi might have against them. 

This release would apply to all customers except those who have withdrawn $250,000 or more from BlockFi interest accounts (BIAs) or BlockFi private customer accounts (BPCs) as of 2 November 2022.

Not only that, following the description of the plan, BlockFi will not be able to reclaim amounts less than $250,000 which customers properly transferred from BIAs or BPCs to the BlockFi Wallet and withdrew from the Wallet before the platform’s break on 10 November 2022. 

In contrast, customer claims of less than $3,000 will be part of the class of convenience claims and will receive a one-time cash distribution from BlockFi’s assets equal to 50% of their claim.

The Chapter 11 claim

On the record, BlockFi had filed for Chapter 11 on 28 November 2022, after it indefinitely suspended withdrawals from the platform as of 11 November 2022. 

Chapter 11 is part of the US bankruptcy law, which allows companies to initiate a restructuring process despite their filing for bankruptcy. 

This means that, like BlockFi, any company that files for Chapter 11 is in a state of insolvency, and hence no longer able to repay its debts as they fall due. 

In the specific case, the suspension of withdrawals was an indicator of insolvency on the part of the crypto service provider.