BlockFi Faces Dissolution As Creditors Accuse CEO Of Fraud And Mischief

Key Points:

• Creditors of BlockFi file a petition to dissolve the company, accusing management of fraud and mischief.
• The bankruptcy crypto lender was accused of delaying lawsuits to negotiate legal releases for top managers.
• BlockFi’s amended bankruptcy plan offers potential recovery of 39% to 100% for interest account holders.

Creditors of the insolvent crypto lender BlockFi have filed a petition to dissolve the company because they became impatient while waiting.

They accused management of “fraud,” “extortion,” and “mischief” in prolonging the settlement of bankruptcy proceedings, including CEO Zac Prince.

The business is delaying the lawsuit so that it may negotiate legal releases for its top managers, who are liable for loans granted to FTX’s Alameda Research, according to a committee representing BlockFi’s unsecured creditors in a document filed late Tuesday evening in the New Jersey Bankruptcy Court.

The reference is to a previously filed under-secret investigation report into business actions, which they claim exposes, in considerable detail, that BlockFi or CEO Prince in particular, committed fraud on clients. Discovering that the company was using its legal monopoly to avoid bankruptcy.

“The mediation is over; negotiations are over. This case is a liquidation. There is no revenue,” according to the filing.

BlockFi has filed an amended plan under Chapter 11 of the bankruptcy legislation. According to an altered disclosure statement, holders of BlockFi interest accounts, who are altogether owed around $1 billion, may expect to recover between 39% and 100% of their assets via the bankruptcy plan, as opposed to 36%-60% if assets are simply liquidated.

Previously, the US Securities and Exchange Commission (SEC) agreed to postpone payment of a $30 million punishment from the defunct crypto lender BlockFi until the debt is repaid.

The bankrupt crypto lender must still pay the remaining $30 million from a $50 million penalty owing to the SEC for failing to register for the offering and sale of its loan products.

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Harold

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