BlockFI Bounces Back, Exits Chapter 11 Bankruptcy

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After nearly a year of grappling with the aftermath of FTX’s collapse,  BlockFi has officially announced its emergence from bankruptcy. The company revealed its commitment to executing the strategies outlined in its bankruptcy plan. 

With the approval of its reorganization plan, BlockFi can now work towards repaying creditors and customers. The insolvency issues originated from BlockFi’s exposure to the failed exchange FTX and the hedge fund Three Arrows Capital. 

“BlockFi is pleased to announce that its bankruptcy plan (the “Plan”) is effective, and the company has emerged from bankruptcy as of October 24, 2023.”

However, the road to asset recovery might not be straightforward. FTX and Three Arrows Capital are going through bankruptcy proceedings, which can make the asset recovery process complex and potentially contentious. 

“Further updates on timing for this initial distribution will be sent in the coming months. We are aiming to begin initial distributions in early 2024. Any subsequent distributions will be dependent on many factors, including most notably any recoveries from FTX and its affiliates,” the announcement read. 

BlockFi had acquired FTX stablecoins valued at hundreds of millions before FTX’s collapse and subsequent bankruptcy in November 2022. The downfall of Sam Bankman-Fried’s empire had a cascading effect that pushed BlockFi into insolvency, alongside other crypto lenders like Celsius Network and Voyager Digital, which filed for bankruptcy last year amid industry turmoil.

As per an official blog post, BlockFi is now authorized to take several critical steps as part of its approved plan, which includes ensuring the accuracy of claims and the fair distribution of funds to clients.

BlockFi had a significant lending relationship with FTX, and its initial bankruptcy claim suggested a debt of $275 million to FTX. Later developments revealed that BlockFi had assets and loans amounting to $1.2 billion with FTX and Alameda. In broader terms, BlockFi’s bankruptcy filings indicate that the company owes as much as $10 billion to at least 100,000 creditors and former customers.