Key takeaways:
- Bankrupt BlockFi suggests converting assets from trade-only wallets into stablecoins for clients.
- Conversion plan aims to alleviate concerns over trade-only withdrawal issues during bankruptcy.
Bankrupt crypto lender BlockFi has filed a motion in the US bankruptcy court (District of New Jersey) to convert “trade-only” wallet assets into stablecoins, enabling users to withdraw these funds. ‘
The assets, including Algorand (ALGO), Bitcoin Cash (BCH), and Dogecoin (DOGE), make up less than 0.5% of all BlockFi US user wallet addresses. These tokens, tradable but not withdrawable due to wallet restrictions, could be exchanged for Gemini Dollar (GUSD) or another stablecoin under the proposed order.
This conversion would address technical limitations and allow clients to access their funds through BlockFi’s platform. The goal is to streamline asset withdrawal, following recent court orders that reopened withdrawals for clients. The hearing date is pending, and affected clients would receive advance notice regarding the proposed order.
Given the challenge of withdrawing these assets, BlockFi is suggesting a one-time swap for Gemini Dollar (GSD) or a comparable stablecoin. Notably, this proposal is distinct from the other trade-only assets on the platform, like Cardano (ADA), Solana (SOL), and Avalanche (AVAX), which are under the custody of BlockFi International.
In 2022, BlockFi joined FTX, Celsius Network, and Voyager Digital in seeking Chapter 11 bankruptcy protection in the U.S. In November 2022, it temporarily halted client fund withdrawals. On August 16, after nine months, the court permitted the resumption of withdrawals.
BlockFi’s restructuring plan has received conditional court approval. The company’s focus lies on recuperating funds from entities like Alameda Research, FTX, Three Arrows Capital, Emergent, and Core Scientific. Recently, on August 21, BlockFi’s legal team opposed FTX’s efforts to retrieve hundreds of millions for creditor repayment.
On August 17, the New Jersey-headquartered firm disclosed its decision to allow crypto withdrawals for qualifying user wallets within the US. This step was taken in adherence to the court directive.
As of that moment, the term ‘eligible clients‘ pertained to BlockFi Wallet users in the U.S. who had not withdrawn or moved cryptocurrency assets such as Bitcoin (BTC) and Ether (ETH) exceeding $7,575 in value and who did not possess any trade-only assets.
