BlockFi Customer Will Lose $375 Million In Interest Account

BlockFi, the bankrupt cryptocurrency lender, was granted permission by a court on Thursday to restore $297 million to customers with non-interest-bearing accounts without compensating consumers who attempted to transfer cash into such accounts at the last minute, according to Bloomberg report.

Bankruptcy Judge Michael Kaplan decided against returning a further $375 million in cash that customers attempted to take from BlockFi’s interest-bearing accounts, known as BIA, after the business froze assets last year, as ripples from FTX’s demise swept across the crypto community.

“The court finds that all digital assets held by the debtors in custodial omnibus wallets are indeed client property, and not property of the bankruptcy estates, subject, of course, to possible avoidance and clawback rights,” Kaplan said.

Customers who owned custodial wallets, on the other hand, did not give up the same ownership rights.

Wallet transfers from interest-bearing accounts to custodial wallets did not occur after 8:15 p.m. EST on Nov. 10, according to Kaplan.

Customers who still had crypto in interest-bearing accounts – roughly $375 million in total – no longer had access to those assets, despite getting email and in-app confirmation from BlockFi.

BlockFi, situated in Jersey City, declared bankruptcy in November, intending to sell or restructure the firm to satisfy creditors. The decision is comparable to those reached in previous crypto-company bankruptcy proceedings. Celsius Network now controls the coins that users deposit in interest-bearing accounts, according to a federal court in New York.

BlockFi suspended transactions in early November of last year and declared bankruptcy on November 28. It rapidly followed FTX after the defunct exchange’s demise.

According to court documents, around $292 million in assets were stranded on the platform when users attempted to relocate them after the Nov. 10 suspension. Kaplan determined that the business may now terminate such transactions.

BlockFi was allowed further time in April to outline its bankruptcy plan. It has until May 15 to submit its departure strategy. Kaplan apparently granted the extension in the hopes of smoothing the case’s progression.

In an earlier court hearing, BlockFi attorney Michael Slade argued that allowing the $375 million in transfers would severely dilute the recovery for Wallet customers and could prevent BlockFi from returning any customer funds due to the practical difficulty of determining how to pay the additional Wallet claims from a fixed pool of assets.

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Harold

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