BlockFi Wants To Convert Client Crypto Into “Trade Only” Asset Amid Bankruptcy

Key Points:

• BlockFi seeks court approval to convert select crypto assets into stablecoins, aiming to simplify withdrawals during bankruptcy.
• This move would allow clients to withdraw stablecoin funds, addressing technical issues with less than 0.5% of total assets.

Cryptocurrency lending firm BlockFi has taken a step forward in its ongoing bankruptcy proceedings by submitting a proposed court order aimed at converting specific client assets into withdrawable funds.

On August 30, the company sought the approval of the bankruptcy court for a plan to transform limited cryptocurrency holdings referred to as “trade only” assets into stablecoins.

These trade-only assets, encompass less than 0.5% of all client funds held by BlockFi. If authorized, the conversion will address technical limitations that currently prevent clients from directly withdrawing these assets in their original form.

Its proposal outlines the conversion of these assets into stablecoins. This would enable clients to subsequently withdraw the stablecoin funds through the platform, streamlining the overall withdrawal process.

The company emphasizes the necessity of this move to ensure a comprehensive withdrawal experience for all client assets under its custody. Recent court orders had previously reopened the BlockFi platform for client withdrawals.

Notably, the bankruptcy court has not yet determined a hearing date for this proposal, which also mandates advance notice to affected clients holding trade-only assets.

In a parallel development, BlockFi is also navigating its Chapter 11 strategy, which includes an online voting portal aimed at optimizing compensation for qualified clients.

Moreover, BlockFi is engaging in efforts to thwart FTX and Three Arrows Capital’s pursuit of recovering billions of dollars tied to transactions preceding the dissolution of their collaboration last year.

The company asserts its role as a victim in the FTX platform situation, disqualifying FTX from reclaiming over $5 billion. Additionally, BlockFi accuses collapsed crypto hedge fund 3AC of fraudulent borrowing and non-repayment from lenders.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.