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BlockFi’s became one of the first victims of the collapse of the Sam Bankman-Fried’s FTX exchange in November 2022.
Crypto lender BlockFi’s Plan Administrator Mohsin Y. Meghji is planning to facilitate the final distribution to all eligible customers and unsecured creditors. It has filed a report with the United States Bankruptcy Court for the District of New Jersey, seeking an order for this repayment.
The move comes after closing a major transaction that monetized all claims against FTX at a premium over their face value. This successful conversion allows for a near-term distribution of 100% for all eligible claims, providing relief to the affected customers and creditors.
“This transaction marks a final chapter in the wind-down and is the best possible outcome for customers of BlockFi,” Meghji stated. He emphasized that these recoveries were previously unimaginable when the cases were filed in November 2022.
“We intend to commence the Final Customer Distribution as quickly as reasonably practicable,” Meghji added.
Backstory
BlockFi’s became one of the first victims of the collapse of the Sam Bankman-Fried’s FTX exchange in November 2022. The New Jersey-based company filed for Chapter 11 bankruptcy protection the same month, shortly after pausing withdrawals. In May this year, it also closed its web platform.
Soon after, BlockFi started seeking court approval to release customer withdrawals that had been locked up. In March 2024, the company reached a settlement with FTX, receiving $874.5 million in claims against FTX and its affiliate Alameda Research. This settlement laid the groundwork for subsequent distributions to BlockFi customers.
Claim Sales
The settlement gave the Plan Administrator the choice to sell the FTX claims to a third party, therefore generating funds. Meghji found a bid opportunity by June 2024 to maximize customer returns, provide recoveries for subordinated creditors, and remove FTX claims-related risk. The sale process began on June 24, 2024, and concluded on July 10, 2024, at a major premium to the face value of the FTX Claims.
Notably, as BlockFi’s platform is no longer operational, any “in-kind” distributions will only be accessible via Coinbase’s relationship with the Plan Administrator. According to the press release, BlockFi International creditors might have to show “Know Your Customer” diligence and identification verification to be qualified for the payments.
Last week, BlockFi announced that it would begin the first interim crypto distributions through Coinbase this month. The company clarified that Coinbase is the sole partner for crypto distribution and warned its customers to be cautious about potential fraudulent activities.
