Bankrupt crypto lender BlockFi will begin interim crypto distributions to creditors through Coinbase starting this month, the company wrote on Twitter and in a blog post.
“The distributions will be processed in batches in the coming months, and eligible clients will receive a notification to the BlockFi account email on file,” the company wrote on Wednesday. “Please note that non-US Clients are unable to receive funds at this time due to the regulatory requirements applicable to them.”
The news marks a significant step in BlockFi's long journey since filing for Chapter 11 bankruptcy protection in November 2022 amid the collapse of crypto exchange FTX.
Founded in 2017 by Zac Prince and Flori Marquez, BlockFi quickly rose to prominence by offering high-yield interest accounts and crypto-backed loans. The company secured significant funding, including a $350 million Series D in March 2021 that valued it at $3 billion.
However, trouble began brewing in July 2021 when several U.S. states issued cease-and-desist orders against BlockFi, claiming its interest accounts were unregistered securities. In February 2022, the crypto lender settled with the SEC for $100 million over its lending product.
The killing blow came in November 2022, when FTX collapsed. BlockFi had substantial exposure to FTX and its trading arm, Alameda Research, with over $1.2 billion in assets tied up between them. When FTX and Alameda went under, BlockFi followed, citing liquidity issues. The lender filed for Chapter 11 bankruptcy on November 28, 2022, listing over 100,000 creditors.
In the ensuing proceedings, BlockFi executives largely blamed their woes on FTX and Alameda. The lender's restructuring plan, which paves the way for creditor repayments, received 90% approval from voting creditors.
BlockFi emerged from bankruptcy in October 2023, nearly a year after filing. As part of its bankruptcy exit plan, BlockFi is now preparing to return customer funds, with distributions expected to start in early 2024.
According to BlockFi's recent announcement, the company has partnered with Coinbase to facilitate the distribution of funds to creditors. The defunct crypto lender will begin processing withdrawals for wallet customers first, followed by distributions for BlockFi Interest Account (BIA) and loan customers.
The company estimates that BIA holders will recover anywhere from 39.4% to 100% of their funds, depending on the outcome of the FTX bankruptcy proceedings and the value of BlockFi's equity in Robinhood.
As of July 2024, BlockFi customers are still awaiting the interim distributions announced by the company. Wallet customers have been able to withdraw funds, but BIA and loan customers have not yet received any repayments. The exact timing and amounts of these distributions remain uncertain, as they are tied to the complex legal proceedings surrounding FTX's bankruptcy.
Edited by Stacy Elliott.