Key Takeaways:
- BlockFi will return 100% of eligible claims to its U.S. clients within the next three months as part of its bankruptcy recovery efforts.
- The distribution of claims follows the sale of BlockFi’s outstanding claims against FTX for an amount exceeding their face value, ensuring maximum returns for customers and creditors.
Defunct digital asset lender BlockFi has unveiled a pivotal development in its bankruptcy estate recovery process, announcing that its U.S. clients will receive 100% of their eligible claims within the next three months.
This significant milestone follows a strategic move by the BlockFi Estate to sell the lender’s outstanding claims against the now-bankrupt crypto exchange FTX for an amount exceeding the face value of those claims.
The sale of FTX claims, which took place from June 24 to July 10, was facilitated through an unnamed third party and marked by a bid described as the “highest and best,” secured at a substantial premium.
Mohsin Y. Meghji, BlockFi’s plan administrator, highlighted the efficiency of this transaction, emphasizing that it enabled BlockFi to distribute the full dollarized petition date value on all allowed customer claims.
Earlier this year, BlockFi reached an in-principle settlement with the FTX and Alameda Research estates, amounting to $874.5 million. This settlement validated BlockFi’s claims in the FTX proceedings without any reductions due to counterclaims, thereby avoiding the costs and resources associated with prolonged litigation.
The strategic advice from M3 Partners and Brown Rudnick played a crucial role in timing the market optimally for monetizing these claims, ultimately maximizing their value and benefiting BlockFi’s customers and creditors.
The exact settlement date for these claims remains undisclosed, but BlockFi has assured that distributions will commence soon, with final claims distributions for U.S. clients expected over the next 90 days.
To facilitate the receipt of these distributions in crypto assets, eligible clients are required to set up a Coinbase account by August 23, 2024. Clients without a Coinbase account, who have submitted their claims to BlockFi by the deadline, will receive their eligible distributions in cash.
International clients, however, may experience a slight delay in receiving their distributions due to regulatory requirements in Bermuda, necessitating additional identity verification and “Know Your Customer” (KYC) diligence.
BlockFi’s financial troubles were significantly impacted by its exposure through loans to Alameda Research, the hedge fund affiliated with FTX. Despite these challenges, the crypto lender managed to provide some relief to its Wallet customers by allowing them to withdraw their funds in October 2023.
