Fallen crypto lending firm BlockFi announced on Tuesday that it has “emerged” from bankruptcy, making its bankruptcy recovery plan effective as of October 24.
Emergence is when a firm that previously entered bankruptcy successfully reorganizes its balance sheet so that its ready to repay its creditors. While not all customers can be made whole right now, the transition begins BlockFi’s process of recovering customer assets from third parties and to continue reconciling customer claims.
“We are proud to say that BlockFi reached its Effective Date more quickly and efficiently than many other retail crypto companies,” wrote the company in a statement on Tuesday.
BlockFi filed for bankruptcy on November 28, less than a month after the fall of crypto exchange FTX and its sister trading firm Alameda Research. The company had $1.2 billion in exposure to both firms, which are now alleged to have engaged in a multi-billion dollar fraud using customer assets.
BlockFi said its new efforts will include attempts to recover assets from such bankrupt firms, including FTX, Alameda, and Three Arrow Capital (3AC). “Success in this litigation could increase client recoveries” they said.
While the company’s custodial wallet customers can submit a withdrawal request today, BlockFi’s interest bearing account (BIA) and loan customers aren’t expected to receive initial distributions until early 2024. “Any subsequent distributions will be dependent on many factors, including most notably any recoveries from FTX and its affiliates,” BlockFi wrote.
FTX is considering relaunching its exchange as part of its recovery plan, with existing customers recovering a stake in the relaunched entity. Other options on the table include bringing in a partner to aid its reboot—or selling the exchange entirely.
Other trading firms to fall last year included Celsius, Voyager, and Genesis—the latter of which was also an alleged victim of FTX’s fraud. According to court testimony Caroline Ellison this month, the ex-Alameda boss presented Genesis with a fake balance sheet that “made Alameda look less risky than it was.”
Former BlockFi CEO Zac Prince alleged the same misbehavior from Alameda days later, blaming the company for his firm’s own fallout, saying Alameda had hidden its loans from FTX in the balance sheet he had been presented.
On the other hand, BlockFi’s own creditors have accused Prince of lending Alameda close to a billion dollars despite knowing of the firm's terrible financials.
Edited by Stacy Elliott.