On Tuesday, fallen crypto lender BlockFi announced that it has managed to ‘emerge’ from bankruptcy and that its recovery plan had gone into effect on October 24th.
Emergence happens when a company that has previously filed for bankruptcy is able to reorganize its balance sheet successfully, making it ready to pay back its creditors.
The transition
Even though the company cannot make all of its customers’ whole right away, this transition involves BlockFi reconciling customer claims and recovering their assets from third parties.
In the statement issued on Tuesday, the crypto lending firm said that they were proud to have reached the effective date a lot more efficiently and quickly than other crypto retail firms.
On November 28th, 2022, BlockFi had filed for bankruptcy, which was less than a month after FTX and its sister trading desk Alameda Research had done the same.
The crypto lender’s exposure to both the companies stood at $1.2 million. It has been alleged that the crypto exchange and its sister trading firm engaged in fraud involving customer assets.
According to BlockFi, its recovery efforts would now include attempts of recovering assets from companies that have gone bankrupt, which include Three Arrow Capital (3AC), FTX and Alameda.
It said that client recoveries could increase if it is able to succeed in this endeavor.
The details
The custodial wallet customers of BlockFi have the option of submitting a withdrawal request right away, but this does not apply to its loan and interest bearing account (BIA) customers.
These customers will have to wait until early 2024 to receive their initial distributions. Other subsequent distributions would depend on several factors, which include the recoveries they would make from FTX and its affiliates.
As part of its recovery plan, there has been talk of the FTX crypto exchange being relaunched and a stake being given to existing customers as part of their recovery.
Some of the other options being explored include selling off the exchange, or bringing in a partner to help with its relaunch.
The bankruptcies
There were other companies that also went bankrupt last year, including Voyager Digital, Celsius Network and Genesis, the latter claiming to be a victim of fraud due to FTX.
This month, court testimony showed that the former CEO of Alameda Research, Caroline Ellison had presented a fake balance sheet to Genesis that made the company look less risky than it was.
Zac Prince, the former CEO of BlockFi, also alleged the same misbehavior and blamed Alameda for the fallout of his own company.
He said that the balance sheet that Alameda had presented to him did not include the loans that it had taken from FTX.
However, it is also worth noting that Prince has also been accused by BlockFi’s own creditors of lending almost a billion dollars to Alameda Research even though he was aware of the company’s terrible financials.