BlockFi’s New Chapter 11 Reorganization Plan Met With Resistance
Disgruntled creditors of the bankrupt cryptocurrency lending firm BlockFi have submitted a new court filing in response to the company’s latest restructuring plan. On May 12, BlockFi outlined its Chapter 11 reorganization plan in a filing with the United States Bankruptcy Court in Trenton, New Jersey. The firm stated that selling BlockFi might not generate enough value for creditors, given it owes nearly $1.3 billion to its top 50 creditors.
Creditors Accuse BlockFi of Delaying Trial
In response, BlockFi creditors submitted another court filing on May 15, arguing that BlockFi deliberately took measures to delay the trial. Represented by the law firm Brown Rudnick, the creditors asserted that BlockFi sold about $240 million worth of crypto before filing for bankruptcy in late November 2022, during a significant market slump following the collapse of FTX.
The Impact of Liquidating Cryptocurrency Assets
“Liquidating nearly all domestic cryptocurrency in November 2022 was a very poor decision,” the creditors argued. They claimed that the decision cost more than $100 million in the months since, and also resulted in “unnecessary and undesired tax consequences”. The creditors further argued that the sale amount did not relate to its bankruptcy, with the filing stating: “Selling $240 million in cryptocurrency was never rationally related to bankruptcy funding needs, given that no reasonable estimate would peg the costs of this bankruptcy at $240 million.”
BlockFi’s Controversial Insurance Purchase
BlockFi customers also alleged that the company misused $22.5 million of customer money to buy a $30 million insurance policy. According to the creditors, this occurred soon after BlockFi liquidated the digital assets prior to filing for bankruptcy.
Creditors Call For New Management
The plaintiffs called on the court to end the case as soon as possible by passing the estate assets “into the hands of new management.” The creditors again stated that such a scenario seems inconsistent with the debtors’ case agenda. This latest filing adds a new layer of complexity to BlockFi’s ongoing bankruptcy proceedings, casting further doubts on the future of the beleaguered cryptocurrency lending firm.
