Bankrupt Crypto Lender Blockfi Enlists Coinbase to Distribute Crypto Payouts

May 10, 2024 Bitcoin.com

FTX customers could get $9B shortfall claim payout by mid-2024

October 17, 2023 Coin Telegraph

FTX customers could get B shortfall claim payout by mid-2024

A proposed settlement could see creditors receive a shortfall claim of $8.9 billion for FTX.com and $166 million for FTX US.

Customers of bankrupt crypto exchange FTX and FTX US could see over 90% of assets returned to them by the end of the second quarter of 2024 after a proposed settlement was reached between FTX creditors and debtors.

On Oct. 17, FTX debtors said they reached a “major milestone” in their Chapter 11 case after “extensive discussions” with the unsecured creditors' committee, a committee of non-US customers, and class action plaintiffs regarding customer property disputes.

FTX ebtors filed a notice of the proposed settlement to a Delaware-based United States Bankruptcy Court on Oct. 16 (for information purposes). However, they need to submit an official filing by Dec. 16 seeking the court’s approval.

(1/4) The FTX Debtors have announced another major milestone in their chapter 11 cases.
— FTX (@FTX_Official) October 17, 2023

Part of the amended plan consists of the “Shortfall Claim,” in which FTX debtors estimates that customers of FTX.com and FTX US would collectively receive 90% of assets available for distribution.

The Shortfall Claim is estimated to be approximately $8.9 billion for FTX.com and $166 million for FTX US. If approved by the Bankruptcy Court, FTX expects these funds to be disbursed by the end of the second quarter of 2024.

John. J. Ray III, CEO and chief restructuring officer of the FTX, was pleased with the terms of the settlement:

"Together, starting in the most challenging financial disaster I have seen, the debtors and their creditors have created enormous value from a situation that easily could have been a near-total loss for customers.”

The amended plan involves FTX dividing the assets into three pools — assets segregated for the benefit of FTX.com customers, U.S. customers and a general pool of other assets. However, only the first two groups are included in the Shortfall Claim.

The Plan Term Sheet is a compromise between the Committee, the Debtors, the ad hoc customer committee and other representatives on a range of issues that balance the rights of customer and non-customer creditors across the U.S. and foreign debtors.
— Official Committee of Unsecured Creditors of FTX (@FTX_Committee) October 17, 2023

FTX debtors however anticipate that customers of both exchanges will not be paid in full and that FTX.com would likely see a greater percentage of losses.

FTX customer clawbacks

Meanwhile, observers noted a part of the proposed plan sees to it that customers that withdrew over $250,000 from the exchange within nine days of bankruptcy would have their claim reduced by 15% of the amount.

However, claims under $250,000 wouldn't be subject to a reduction, FTX debtors explained:

"Eligible customers that have a preference settlement amount of less than $250,000 during the nine-day period would be able to accept the settlement without any reduction of claim or payment."

However, as part of the amended plan, FTX may exclude from the settlement any insiders, affiliates and customers who may have had knowledge of the commingling and misuse of customer deposits and corporate funds, it said.

Former FTX CEO Sam Bankman-Fried is two weeks into his fraud trial on matters relating to his involvement in FTX’s collapse to bankruptcy last November.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

Crypto lender BlockFi gets court nod to repay customers

September 26, 2023 Coin Telegraph

Blockfi

The approval is seen as a milestone moment for BlockFi's over 100,000 creditors, who have been long awaiting repayment.

The customers of bankrupt cryptocurrency lending platform BlockFi are one step closer to being paid out after a United States Bankruptcy Court in New Jersey approved its liquidation plan.

Bankruptcy Judge Michael A. Kaplan approved BlockFi's third amended Chapter 11 plan in a Sept. 26 court hearing, a filing on the same day shows.

*Sept. 26 court filing in the bankruptcy case of BlockFi. Source: Kroll*

The amount of repayment received by BlockFi's unsecured creditors will largely depend on whether BlockFi succeeds in its legal battle against FTX and other bankrupt cryptocurrency firms.

BlockFi's liquidation plan was approved after the firm settled a long-fought dispute with the creditors committee over the company’s senior management.

The now bankrupt lending platform blamed FTX's collapse for its own failure despite the creditor's committee citing concerns with BlockFi's relationship with FTX and its former CEO Sam Bankman-Fried.

Estimates show BlockFi owes up to $10 billion to over 100,000 creditors, including $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund Three Arrows Capital.

This is a developing story, and further information will be added as it becomes available.

Magazine: What do crypto exchanges really do with your money?

Celsius creditors allege Wintermute facilitated ‘wash trading’: Report

June 24, 2023 Coin Telegraph

Alex Mashinsky

It was alleged that Celsius executives purportedly involved Wintermute to facilitate "wash trading" in an effort to “fraudulently" manipulate trading volumes on the Celsius platform.

Creditors of bankrupt cryptocurrency lending platform Celsius have alleged that crypto market maker, Wintermute, assisted Celsius executives in manipulating the price of CEL (CEL) through the use of “wash trading.”

According to a June 23 Bloomberg report, which cited a recent court filing, Celsius creditors have recently amended their lawsuit in the United States District Court of New Jersey to allege that Wintermute was engaged by Celsius executives to conduct improper market trading.

*June 19 court filing in the United States District Court of New Jersey. Source: assets.bwbx.io*

Wintermute, described as a “purported market maker in the crypto industry,” allegedly aided Celsius Network's CEO, Alex Mashinsky, and other executives to “unlawfully manipulate and profit from the illegal wash trading of unregistered CEL Tokens."

The creditors alleged that both, the Celsius executives, and Wintermute, acted with "scienter in connection with the manipulative acts alleged."

“Defendant Wintermute and the Executive Defendants engaged in a scheme that artificially inflated the trading volume of the CEL tokens sold and marketed by Celsius.”

According to the filing, the alleged scheme was uncovered through “publicly available internal conversations” between Celsius executives.

It was further claimed that Celsius executives engaged Wintermute to be involved in these “improper market making” activities from around March 2021 up “until the Celsius froze withdrawals in June 2022.”

It was reported that Celsius had no measures in place to prevent improper market making.

“The supposed controls were virtually non-existent, and those that did exist did not monitor for or protect against “wash trading” or self-dealing” it was stated.

This comes after it was recently reported that the assets of Celsius Network had been acquired through an auction.

On May 25, it was reported that crypto consortium Farhenheit was the successful bidder to acquire the assets of Celsius, previously valued at $2 billion.

The consortium obtained Celsius Network’s institutional loan portfolio, staked cryptocurrencies, mining unit and other alternative investments – which comes almost a year after Celsius initially filed for Chapter 11 bankruptcy, in July 2022.

Cointelegraph reached out to Wintermute for comment, but did receive a response by the time of publication.

Magazine: Tornado Cash 2.0: The race to build safe and legal coin mixers

Crypto Exchange Bittrex Enters Chapter 11 Bankruptcy Protection Following SEC Lawsuit

May 9, 2023 Bitcoin.com

BlockFi to sell $160M in Bitcoin miner-backed loans: Report

January 24, 2023 Coin Telegraph

BlockFi to sell 0M in Bitcoin miner-backed loans: Report

Bankruptcy

The deadline for bidders to submit offers for the Bitcoin-machine-backed loans is set for Jan. 24.

Bankrupt crypto lending firm BlockFi has plans to sell off $160 million in loans backed by around 68,000 Bitcoin mining machines as part of bankruptcy proceedings, according to reports.

In a Bloomberg report on Jan. 24, two people “familiar with the matter” claim that BlockFi started the process of selling off the loans last year.

The crypto lender filed for Chapter 11 bankruptcy in Nov. 2022, citing its significant exposure to the now-defunct crypto exchange FTX for its downfall.

However, some of these loans have already defaulted since then and could be undercollateralized given the decline in the price of Bitcoin mining equipment, according to the sources, adding the last day for bidders to submit offers for the loans is Jan. 24.

In comments to Cointelegraph, crypto lawyer Harrison Dell, director at Australian law firm Cadena Legal explained that if Bitcoin mining equipment used as collateral is worth less than the value of the loans, the loans are “not worth their paper value anymore to BlockFi.”

Dell said that the people bidding for the debts are most “likely” to be debt collection businesses buying for “cents on the dollar.”

He added that selling the debt is likely “all that the administrators” for BlockFi can salvage for these assets.

Dell also suggested that this is just the beginning of what’s to come for the crypto industry. He noted:

“This is just the start of the asset sales from BlockFi and other crypto firms in Chapter 11 bankruptcy in the US.”

Cointelegraph reached out to BlockFi for comment but did not receive a response by the time of publication.

BlockFi’s attempt to liquidate its loans is likely part of efforts to pay off its creditors, which according to its bankruptcy filing in Nov. 2022, the company has over 100,000 creditors.

At the time of its bankruptcy, it was reported that BlockFi sold $239 million of its own cryptocurrency assets to cover the bankruptcy expenses and warned approximately 70% of its staff that they would lose their jobs.

Earlier this week, BlockFi petitioned the court in a Jan. 23 declaration to release funds to allow bonuses for key employees in a bid to retain them amid the Chapter 11 bankruptcy proceedings.

BlockFi’s chief people officer Megan Crowell told the court that without financial incentives, it’s unlikely the company will be able to retain its employees.

Crowell said it is highly likely many staff will leave the company without competitive compensation, noting that it would add further financial impact to the company down the road.

FTX Discovers $5.5B in Liquid Assets — Debtors Explore Ways to Maximize Recovery via Potential Sale of Subsidiaries, Real Estate

January 18, 2023 Bitcoin.com

BlockFi files motion to return frozen crypto to wallet users

December 20, 2022 Coin Telegraph

Blockfi

Crypto lender BlockFi has asked a U.S. Bankruptcy Court for the authority to return the crypto held in BlockFi Wallets to users.

Bankrupt crypto lending platform BlockFi has filed a motion requesting authority from the United States Bankruptcy Court to allow its users to withdraw digital assets currently locked up in BlockFi Wallets.

In a motion filed on Dec .19 with the U.S. Bankruptcy Court in the District of New Jersey, the lender asked the court for authority to honor client withdrawals from wallet accounts as of the platform’s pause on Nov. 10.

The court documents also request permission to update the user interface to properly reflect transactions as of the platform’s pause.

In a widely shared email sent to affected users, BlockFi called the motion an “important step toward our goal of returning assets to clients through our chapter 11 cases," adding

“It is our belief that clients unambiguously own the digital assets in their BlockFi Wallet Accounts.”

According to BlockFi, this motion will not impact withdrawals or transfers from BlockFi Interest Accounts, which remain paused at this time.

The lending platform has also signaled intentions to seek “similar relief from the Supreme Court of Bermuda with respect to BlockFi Wallet Accounts held at BlockFi International Ltd.”

BlockFi International is a subsidiary of the company based in Bermuda which runs its non-U.S. operations.

Crypto blogger Tiffany Fong shared the communication sent to her by BlockFi on Dec. 19, commenting that the embattled firm appears to be moving much faster than Celsius, which filed for bankruptcy over five months ago in July as opposed to BlockFi's bankruptcy filing in November.

WOW, @BlockFi has already filed a motion requesting client withdrawals for assets held in BlockFi Wallet Accounts. S/O to BlockFi for moving exponentially more quickly than @CelsiusNetwork in Ch 11. pic.twitter.com/JvtWzMklNA
— Tiffany Fong (@TiffanyFong_) December 20, 2022

According to the court documents, a hearing to decide if the motion will be granted is scheduled for Jan. 9, 2023.

While a separate hearing regarding wallet accounts held at BlockFi International Ltd is scheduled to go before the Supreme Court of Bermuda on Jan. 13, 2023.

BlockFi halted client withdrawals and requested clients not to deposit to BlockFi wallets or Interest Accounts on Nov. 11, citing a lack of clarity around FTX.

By Nov. 28, BlockFi filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey for the company and its eight subsidiaries. BlockFi International filed for bankruptcy with the Supreme Court of Bermuda on the same day.