- BlockFi filed for Chapter 11 bankruptcy in November 2022 following the collapse of FTX and Alameda Research.
- Non-US clients will not receive interim crypto distributions due to regulatory constraints.
- BlockFi’s CEO testified that substantial loans to Alameda Research contributed to the company’s financial downfall.
Bankrupt crypto lender BlockFi has announced it will begin interim crypto distributions through Coinbase starting in July. These distributions, occurring in batches over several months, will notify eligible clients via the email linked to their BlockFi accounts, marking a significant step in the company’s effort to address its financial obligations following bankruptcy.
BlockFi clarified that currently only U.S.-based clients can receive these funds. This limitation is due to regulatory requirements affecting international clients. Following its Chapter 11 bankruptcy declaration in November 2022, which was brought on by the fall of FTX and its affiliated firm, Alameda Research, the corporation decided to employ Coinbase for distribution.
BlockFi’s financial problems leading to bankruptcy were mostly related to its massive loans to Alameda Research, which then misrepresented its financial stability. CEO Zac Prince testified that BlockFi might have avoided bankruptcy if Alameda had accurately disclosed its financial situation. Instead of returning $850 million in crypto as requested, Alameda only repaid $150 million.
After filing for bankruptcy, BlockFi emerged from the process in October with a structured plan to wind down its operations and distribute remaining assets. The BlockFi web platform was shut down in May, and the company has since shifted all client communications to official channels. These include email, social media, and partners like Kroll and Digital Disbursements.
In light of the ongoing distributions, BlockFi has advised clients to be cautious of scams from unauthorized third parties. The company stressed that all legitimate communications will be conducted through verified channels.
The advisory is crucial as the company continues its efforts to manage its financial recovery and address creditor claims through the interim distributions. The use of Coinbase is a key element in this recovery process, ensuring that clients receive their due distributions securely and efficiently.
BlockFi’s announcement represents a crucial development in its bankruptcy resolution process. By initiating crypto distributions through Coinbase, the company aims to fulfill part of its financial obligations to US clients while navigating ongoing regulatory and operational challenges.
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