BlockFi, the crypto lending firm that recently filed for bankruptcy, has revealed that the success or failure of its litigation against commercial counterparties, including FTX and Alameda, will significantly impact its clients and creditors. The firm claims that “in excess of $1 billion” could be at stake in the legal proceedings, and the outcome will determine the amount of funds that clients can recover while waiting for their money back.
The wind-down plan filed with the U.S. Bankruptcy Court for the District of New Jersey has projected client recoveries, including $1.06 billion in BlockFi Inc. Interest Account Claims, $216 million in BlockFi Lending LLC Private Client Account Claims, and $371 million in BlockFi International Ltd. Private Client and Interest Account Claims. However, the firm has cautioned that actual recoveries may differ from the projected figures and will depend on several factors.
BlockFi has $355 million in crypto assets frozen on FTX, and another $671 million loaned to FTX s trading arm Alameda Research. These assets are also going through Chapter 11 wind-down proceedings in Delaware, and the outcome of the litigation with these commercial counterparties is expected to have the biggest impact on potential recoveries.
Last week, New Jersey Bankruptcy Judge Michael Kaplan ruled that BlockFi custodial wallet users are entitled to the return of nearly $300 million in owed funds. The liquidation plan filed on Friday “provides for the return of non-estate digital assets held in client wallet accounts in connection with the Wallet Program in full, subject to applicable set-offs,” according to a tweet by the firm.
BlockFi’s bankruptcy has sent shockwaves through the crypto lending industry, and its clients and creditors are eagerly awaiting news of potential recoveries. The outcome of the litigation with FTX and Alameda is likely to be closely watched, as it will significantly impact the final outcome of the bankruptcy proceedings.
