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BlockFi victims set to get reimbursed

blockfi-victims-set-to-get-reimbursed
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BlockFi victims set to get reimbursed

BlockFi, the troubled crypto lender, progresses towards repaying its clients as the U.S. bankruptcy court in New Jersey conditionally approves its disclosure statement.

BlockFi’s efforts to reorganize and refund its clients have taken a positive step forward with the conditional approval of its disclosure statement by the U.S. bankruptcy court in New Jersey.

Mark Renzi, the сhief restructuring officer of BlockFi’s parent company Berkeley Research Group, expressed confidence in the plan, aiming to expedite the return of crypto assets to the affected clients.

However, the development has seen several roadblocks, as certain parties have opposed the bankruptcy plan.

The disgraced Sam Bankman-Fried’s FTX, Three Arrows Capital (3AC), and Gary Gensler‘s Securities and Exchange Commission (SEC) have contested BlockFi’s proposed bankruptcy plan, raising concerns about the fairness of the plan’s provisions.

They argue that the plan downgrades their claims unfairly, lacks procedural fairness, and grants broad absolution to BlockFi and its management from legal responsibility. Additionally, disputed transactions worth over a billion dollars further complicate the situation.

3AC seeks to recover $220 million

In a significant move, the liquidator of Three Arrows Capital (3AC) has announced its intention to reclaim $220 million in “preferential payments” made to BlockFi. This adds to the complexity of the reorganization process and highlights the ongoing disputes between BlockFi and its creditors.

BlockFi’s fate rests on the vote to approve the proposed reorganization, and the deadline for voting is set for September 11. It is a crucial moment for all parties involved, and the decision will determine the company’s future and ability to refund its clients.

BlockFi’s turbulent journey

BlockFi’s troubles began when it declared bankruptcy after FTX’s downfall last year. Subsequently, creditors alleged fraud and misconduct against CEO Zac Prince, leading to the request for the firm’s dissolution.

A court report in July revealed that the CEO dismissed warnings from the risk management team about the unstable financial situation of major counterparty FTX.

These early warnings highlighted the risks associated with FTT collateral and its potential significant loss in value in the event of financial troubles for Alameda or FTX.

While BlockFi has made progress in its quest to refund clients, challenges remain on the path to reorganization. As the September 11 voting deadline approaches, the future of BlockFi hangs in the balance, impacting its clients and the broader cryptocurrency lending industry.