BlockFi to Shut Operations, Return Crypto Assets to Customers

BlockFi emerged from bankruptcy on Tuesday, saying it will wind down operations and begin returning crypto assets to customers 11 months after it was swept away by the turbulence in thecryptocurrency industry following FTX’s collapse. 

Jersey City, New Jersey-Based BlockFi will continue to pursue additional payments through the bankruptcies of other crypto companies including FTX and Three Arrows Capital under a bankruptcy plan approved in court last month. 

Success in that litigation could increase client recoveries, BlockFi said on Tuesday. 

BlockFi estimated in court filings that customers who had interest-bearing Earn accounts will receive between 39.4 percent and 100 percent of the value in their accounts. 

In its bankruptcy filing in November 2022, BlockFi had cited its loans to FTX’s sister firm Alameda as one of the reasons for its collapse.

Separately, FTX founder Sam Bankman-Fried is currently on trial for fraud in Manhattan. 

BlockFi said withdrawals are currently available to nearly all of its Wallet customers. Those with BlockFi Interest Accounts and Retail Loans will be repaid over the coming months, but the amounts they receive could vary based on the outcome of the FTX bankruptcy, BlockFi said.

Crypto lenders, the de facto banks of the crypto world, boomed during the pandemic, attracting retail customers with double-digit rates in return for their crypto deposits.

Such companies are not required to hold capital or liquidity buffers like traditional lenders and some found themselves exposed when a shortage of collateral forced them — and their customers — to shoulder large losses.

© Thomson Reuters 2023

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