See More

BlockFi Creditors Await Fund Recovery: FTX Clawback in Focus

2 mins
Updated by Ryan James
Join our Trading Community on Telegram

In Brief

  • BlockFi creditors are one step closer to recovering their assets.
  • In a recent filing, the bankrupt crypto lender said how much it can repay is dependent on its own claims against FTX.
  • BlockFi became insolvent after the FTX bankruptcy left the firm out of pocket, creating a major liquidity crisis.
  • promo

Customers of the bankrupt crypto lender BlockFi are one step closer to recovering at least some of their assets.

In a tweet on Saturday, the firm announced that it has filed a disclosure statement with the New Jersey court overseeing its insolvency proceedings.

BlockFi: Another FTX Casualty

BlockFi first filed for Chapter 11 bankruptcy protection back in November. In its initial filing, the company blamed a liquidity crisis created by its exposure to FTX. 

Through loans to Alameda Research, BlockFi became one of the most high-profile victims of the FTX-Alameda scandal. It also held cryptocurrencies on FTX’s platform that it has been unable to recover.

In a series of tweets on Saturday, BlockFi explained that what it can recover for clients is largely dependent on its efforts to claw back money from FTX and Alameda.

The Bankrupt company will now present its disclosure statement to the Court on June 20.

After that date, the solicitation process will commence. That means the disclosure statement will be sent to BlockFi’s various creditors. They will then be able to vote on whether or not to accept the plan.

A Chain of Debt

Of course, BlockFi isn’t the only company that took a serious hit from the collapse of FTX.

Many crypto businesses held assets on the platform. And various crypto funds and individual investors were also caught up in the storm.

To complicate matters further, FTX is in its own battle to claim nearly $4 billion from the embattled crypto platform Genesis. 

In that case, FTX lawyers want loan repayments the firm made to Genesis 90 days before it went bust. Overall, Genesis lent billions of dollars to Alameda Research but much of this was repaid by the time the FTX companies collapsed.

As the case unfolds, to counter FTX’s claim, Genesis must disprove allegations that the repayments diverged from normal debt collection practices.

IRS Jumps Line Ahead of FTX Creditors

Another factor may further frustrate FTX creditors’ attempts to recuperate their lost funds. A recent filing made by the Internal Revenue Service (IRS) reveals that the tax authority is claiming priority over creditors in the FTX bankruptcy case.

The agency is claiming $44 billion in tax claims from the defunct exchange.

Top crypto platforms in the US | March 2024



All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

James Morales
James is a London-based editor, writer and explorer of the cryptosphere who started his journalistic career writing about digital art before honing his craft as a financial technology reporter. From the latest innovation in digital assets to the evolution of Web3, he is perpetually fascinated by the technologies of decentralization.