Settlement Reached in BlockFi Bankruptcy Proceedings
In a significant development regarding the bankruptcy proceedings of BlockFi, a settlement has been reached between the US Department of Justice (DOJ) and the administrator managing the crypto lender’s wind-down. This agreement, which was sanctioned by US Bankruptcy Court Judge Michael B. Kaplan in New Jersey, comes as a resolution to a legal dispute over the transfer of crypto assets valued at $35 million.
Details of the Legal Dispute
The DOJ had initiated this lawsuit in May 2023, claiming authority to seize funds from BlockFi that were linked to two Estonian citizens involved in a separate criminal fraud investigation. The Justice Department contended that the bankruptcy court lacked the jurisdiction to stop BlockFi from transferring these assets. By dismissing the case with prejudice, both parties have agreed that it cannot be brought back to court, and each will cover their own legal expenses as part of this arrangement.
“The bankruptcy court lacked the jurisdiction to stop BlockFi from transferring these assets.”
Court Proceedings and Key Figures
Representatives from both sides were present during the court proceedings, with Mohsin Meghji serving as the Plan Administrator for BlockFi and Seth B. Shapiro leading the DOJ’s legal team from the Civil Division’s Commercial Litigation Branch.
BlockFi’s Ongoing Bankruptcy Management
This resolution comes against the backdrop of BlockFi’s ongoing efforts to manage its bankruptcy, which it entered in November 2022 amid the fallout from the FTX collapse. Following this, BlockFi ceased operations of its web platform and began working with Coinbase to facilitate the return of funds to clients, including those with various account types.
Clients have been given until April 28, 2024, to withdraw their assets from the platform. In a related matter, BlockFi reached an $875 million settlement with FTX and Alameda Research early last year, which addressed claims totaling around $1 billion. CEO Zac Prince testified that actions by FTX founder Sam Bankman-Fried played a pivotal role in BlockFi’s financial crises.
Current Status of BlockFi’s Bankruptcy
As of September 2023, BlockFi’s Chapter 11 bankruptcy plan was approved, allowing the company to begin repaying over 10,000 creditors amid liabilities exceeding $10 billion. This highlights the ongoing challenges faced in the wake of the crypto industry’s turbulence and the broader implications for creditors and stakeholders involved.
