BlockFi, the cryptocurrency lender, has received court approval to repay 100% of customers’ funds and unsecured creditors after two years of financial turmoil. The milestone was granted by the US Bankruptcy Court for the District of New Jersey, allowing BlockFi to return all customer assets. The approval comes after BlockFi’s sale of $874.5 million in claims against FTX to a third-party claims purchaser. The company plans to distribute the funds fully to its customers in the near future, marking a positive outcome after the suspension of deposits and withdrawals in 2022.
The court approval signifies a change in BlockFi’s distribution plan, with the company announcing an interim distribution of crypto assets to eligible customers in July. To qualify for the distribution, users are urged to open a Coinbase account by August 23. Those without an account will receive their assets in cash. BlockFi has assured customers that its Plan Administrator and Joint Liquidators are collaborating with authorities to ensure a smooth distribution process for international clients. The company acknowledges the pain its customers endured during the financial crisis but sees the full return of claims value as a positive step forward.
BlockFi’s financial complications stemmed from the collapse of FTX in November 2022, leading to the company’s bankruptcy filing. Legal and financial entanglements between BlockFi and FTX were resolved with a settlement in March, where claims were sold at a premium. Customers are set to receive 100% of the dollar value of their claims, but the appreciation of BTC and ETH may result in customers receiving less cryptocurrency than initially deposited. Distributions are expected to begin shortly after August 23, following the settlement with FTX and Alameda Research estates.
In March 2023, BlockFi announced a $874.5 million settlement with FTX and temporarily ceased operations. The company shut down its web platform in May 2024 but continues to maintain legacy systems to support the liquidation and distribution processes. Customers will receive in-kind distributions through Coinbase, while fiat claims are being managed by Kroll. Non-U.S. clients may face additional verification requirements to receive their funds. BlockFi’s journey to repay customers in full represents a significant step in resolving the financial turmoil and legal battles that have plagued the company for the past two years.
The company’s commitment to making customers whole has been highlighted by the court approval and settlement with FTX. BlockFi’s transparency and communication with users throughout the process demonstrate a dedication to addressing the financial crisis and ensuring a positive outcome for all stakeholders. As BlockFi prepares to distribute funds and wind down operations, the focus remains on providing a smooth transition for customers and fulfilling its obligations. With the court’s approval secured, BlockFi can now move forward with its plans to repay all customers and unsecured creditors, marking a turning point in the company’s journey towards financial stability and recovery.
