BlockFi has formally applied to the United States Bankruptcy Court for the District of New Jersey for permission to initiate the conversion of “trade-only” assets from users’ accounts into stablecoins. This strategic step allows individuals to conveniently withdraw their funds, advancing the ongoing process that BlockFi initiated in August.
Application for Conversion of Trade-Only Assets
On the 29th of August, BlockFi submitted a comprehensive application, seeking the court’s authorization to facilitate the conversion of designated trade-only assets into stablecoins.
The assets in question, which encompass Algorand’s native token, Bitcoin Cash, and Dogecoin, present challenges for easy withdrawal. As a solution, BlockFi proposes a one-time exchange, offering Gemini Dollar (GUSD) or an alternative stablecoin.
Notably, the quantum of trade-only assets doesn’t surpass 0.5% of the total assets held by BlockFi users in U.S. wallets. It is essential to highlight that additional trade-only assets, including but not limited to Cardano ADA, Solana, and Avalanche, are being separately managed by BlockFi International.
The company’s request has garnered endorsement from the BlockFi creditors’ committee, a body recognized by the court. This pivotal support further underscores the legitimacy and importance of the requested action.
BlockFi’s Bankruptcy Timeline and Ongoing Restructuring
In the tumultuous year of 2022, BlockFi found itself among a cohort of companies seeking refuge under Chapter 11 bankruptcy protection in the U.S. These companies include FTX, Celsius Network, and Voyager Digital. Subsequently, in November 2022, the company temporarily curtailed clients’ withdrawal activities.
However, a ray of hope emerged on the 16th of August when the court granted BlockFi the green light to reopen withdrawals after a hiatus spanning nine months.
Conditional Approval and Strategic Goals
Significantly, the court has provisionally sanctioned BlockFi’s restructuring blueprint. The company’s foremost objective is the recovery of funds from several entities. Notably, these entities include Alameda Research, FTX, Three Arrows Capital, Emergent, and Core Scientific.
Interestingly, recent developments witnessed BlockFi’s legal team countering FTX’s efforts to retrieve substantial sums. This amounted to hundreds of millions of dollars—in a bid to meet creditor obligations.
Financial Landscape and Outstanding Liabilities
As of estimations in April 2023, BlockFi’s indebtedness stands at an approximate $10 billion, owed to a sprawling landscape of over 100,000 creditors. Notably, the company owes significant sums, with its three largest creditors being owed a staggering $1 billion collectively.
Additionally, a substantial liability of $220 million rests with the crypto hedge fund 3AC, which has also faced its own financial tribulations.
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