BlockFi's bankruptcy exit plan
BlockFi Wallet customers would be paid in full
Coindesk Content Chief of Staff Pete Pachal predicts the FTX contagion will continue, and markets are waiting for the next 'domino to fall.'
BlockFi has filed a plan that explains how it expects to pay off creditors and exit Chapter 11 bankruptcy protection.
The bankrupt cryptolender plans to reorganize as a standalone company but added that it will continue a marketing process to sell all or substantially all of its assets.
"While open to any alternative that maximizes value, BlockFi is filing a proposed plan that contemplates a standalone restructuring, predicated on the debtors’ goal to provide clients as close to a full recovery as possible," Mark Renzi of Berkeley Research Group, the company’s financial advisor, said in a previous court filing.
BlockFi app and credit card from BlockFi website (BlockFi website)
BLOCKFI MAKES FIRST APPEARANCE IN BANKRUPTCY COURT
Under its proposed plan of reorganization, BlockFi will pay back in full BlockFi Wallet customers.
Creditors who will likely receive less than 100% for their claims would get a combination of cash and stock. The filing did not list proposed recovery amounts.
BlockFi plans to fund the plan with cash, coins and new common stock in the reorganized company. The company has $256.9 million in cash on hand. It has said the amount is expected to provide sufficient liquidity to support certain operations during the restructuring process.
Account holders will receive a pro rata share of cash and an allocation of shares in the reorganized company.
BlockFi's logo in an illustration, Nov. 28, 2022. (Reuters/Dado Ruvic/Illustration / Reuters Photos)
Unsecured creditors will receive cash or a portion of an equity allocation pool of new common stock in the reorganized company.
Effectiveness of the plan also requires an order by the Bermuda Court recognizing the U.S. court’s order confirming the plan. BlockFi International Ltd., a Bermuda incorporated company, filed a petition with the Supreme Court of Bermuda for the appointment of joint provisional liquidators.
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BlockFi and eight affiliates filed for bankruptcy protection Monday in New Jersey, citing the collapse of FTX.
FTX in June acquired an option to buy BlockFi as part of a $400 million bailout of BlockFi.
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"FTX had been expected to acquire the debtors before FTX’s true financial circumstances were revealed, FTX’s then-management team resigned, and FTX free-fell into bankruptcy. Given these circumstances, the debtors had no choice but to file for Chapter 11 relief to protect their clients and preserve the value of their business," Renzi previously stated.
BlockFi said it owes FTX $275 million.
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Two of BlockFi's largest competitors, Celsius Network and Voyager Digital, filed for bankruptcy in July, citing extreme market conditions that had resulted in losses at both companies.
BlockFi said it too suffered during that period of volatility, but the FTX loan had helped keep it afloat while its rivals went bankrupt.
Reuters contributed to this report.