Bankrupt BlockFi Is Set to Liquidate Itself to Pay Off Its Debt

In the months after its bankruptcy filing in November 2022, BlockFi attempted to sell itself but was unsuccessful. So it plans to go into “self-liquidation” to pay back its debts as efficiently as possible . However, it’s possible that its consumers won’t get their whole money back.

BlockFi Couldn’t Find Itself a Buyer

BlockFi, a cryptocurrency platform well-known for its loan business, has announced its intention to enter insolvency in the near future in order to repay its creditors . After the FTX platform failed in November 2022, the company filed for bankruptcy.

Since January 2018 however, the business has been in discussions with other interested parties about selling its crypto exchange . After much deliberation the BlockFi teams came to the conclusion that the proceeds from a sale wouldn’t be enough to cover the company’s debts.

As a result, the company is considering going out of business on its own. The bankruptcy court and a majority of the company’s creditors must approve the latter . This strategy aims to maximize debt payback by:

“The ‘reverse charge transaction’ is moving forward, and assets will be distributed to creditors in a straightforward manner. Customers may get the best refund the quickest by voting on the plan .”

The 50 biggest debtors of BlockFi are owed a total of $1.3 billion. This is in addition to the monetary compensation planned for the cryptocurrency platform’s users of whom 73% owned assets worth between $1 and $1,000 and 1% had portfolios worth over $50,000.

BlockFi’s Bankruptcy Was Triggered by FTX’s Collapse

Companies in the industry have been failing at an alarming rate in 2022. Cash flow has been tight for many businesses, including BlockFi since the Terra (LUNA) ecosystem collapsed and the Three Arrows Capital (3AC) hedge fund went bankrupt . The corporation had loaned the Singaporean fund $1 billion.

The FTX group’s detachment, however, delivered the killing blow. Sam Bankman-Fried’s formerly $32 billion corporation lent $250 million to BlockFi using the FTX coin which was previously known as FTT. BlockFi was unable to remain solvent when FTT’s worth dropped by more than 96% as a result of FTX’s bankruptcy. Thus the lending-focused cryptocurrency corporation sought Chapter 11 bankruptcy protection on November 28, 2022.

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