Key takeaways:
- As part of its bankruptcy procedures, BlockFi is given authorization to repay $297 million to a select group of consumers.
- Customers with BlockFi Interest Accounts [BIA] are ineligible for the refunded money.
Crypto lender BlockFi has been given court approval to return $297 million to customers with non-interest-bearing accounts. However, the funds will not be repaid to customers who attempted to transfer their funds into those accounts at the last minute.
This issue of returning funds has been ongoing for several months following the collapse of FTX. BlockFi appeared in court in Trenton, New Jersey, where it sought permission to continue its operations while working on a solution to repay all affected customers.
The company expressed optimism about finding a potential buyer that would impact the refund process. Around 48,000 users attempted to move $375 million from interest accounts to wallet accounts during BlockFi’s bankruptcy filing in November.
Although customer lawyers argued for the return of this sum, Judge Kaplan ruled against it because the transactions were not finalized and BlockFi’s terms allowed them to block such transfers during the service halt.
Users using BlockFi Interest Accounts (BIA) are exempt from the requirement for a refund of money. Funds in BIA accounts were utilised by BlockFi for its lending operation, and as a result, according to Bankruptcy Judge Michael Kaplan, they now belong to the bankruptcy estates. This implies that the money will eventually be utilised to pay off all debtors.
In contrast, the Wallet programme kept consumer deposits apart from other monies and did not pay interest on them.
On November 11, around 48,000 BlockFi customers tried to move $375 million from their BIA accounts to Wallet accounts. However, BlockFi had already suspended all transfers on November 10 at 8:15 pm, effectively preventing these transfers from occurring. Judge Kaplan noted that the user interface did not accurately reflect these transactions.
In a previous court hearing, BlockFi attorney Michael Slade had argued that approving the $375 million (roughly Rs. 3,080 crore) in transfers would significantly reduce the recovery for Wallet customers and might even prevent BlockFi from returning any customer funds because it would be difficult to figure out how to pay the additional Wallet claims from a fixed pool of assets.
