A court on Tuesday approved bankrupt crypto lender BlockFi’s request to start reimbursing creditors, a major step in shutting down the business. BlockFi will now begin repaying creditors before the end of the year, as the approved plan stated.
The court section, overseen by Judge Michael Kaplan, saw the approval of the request after the committee representing creditors and customers favored the idea. A conflict between the committee and the lender’s senior managers halted the agreement; however, a resolution between the parties meant the process was back on track.
Refund Percentage Dependent on FTX Case Outcome
Although an August filing stated that creditors would receive between 35% and 63% of their total investment, the percentage BlockFi would reimburse them wholly depends on the outcome of the case with FTX and other bankrupt crypto firms.
BlockFi filed for bankruptcy on November 28 after disclosing exposure to FTX’s collapse. The crypto lender sued Sam Bankman-Fried, FTX, and Three Arrows Capital, seeking to recuperate up to $1 billion from the litigation.
BlockFi has blamed its bankruptcy solely on FTX and Three Arrows, alleging that their collapse abruptly ended its operation. However, the committee for creditors had a different option on the claims, stating that the lender’s management failed to exercise due diligence before entering into a deal with FTX and Three Arrows.
Payments to Resume Soon
If things go according to plan, BlockFi stated it would start repaying its creditors before the end of the year. Court documents revealed that the crypto lender has slated some creditors to receive part payments in Bitcoin and Ethereum.
BlockFi owes over 100,000 creditors up to $10 billion and $1 billion to each of its three highest creditors. It intended to resurrect from bankruptcy but concluded earlier this year that liquidation was the best way to make customers partially whole.
