A judge has approved repayment for BlockFi custodial wallet holders, but said the interest-bearing funds still belong to the bankrupt company.
BlockFi custodial wallet users may receive a massive $300 million repayment from the bankrupt digital asset lender. On Thursday, a New Jersey judge ruled that assets locked up in BlockFi’s custodial accounts belong to customers rather than the company. However, the judge further ruled that after the November withdrawal suspension, users sought to transfer another $375 million from interest-bearing accounts that still belonged to BlockFi.
as Judge Michael Kaplan Keep This:
“The Court finds that all digital assets held by debtors in the Custodial Omnibus Wallet are in fact the property of the customer and not property of the bankruptcy estate, subject, of course, to potential avoidance and clawback rights.”
Meanwhile, Judge Kaplan Welcomes Blockfi Interest-Bearing (BIA) Holders Reading,
“No transfer requests were made and completed by customers between BIA and Custodial Wallet accounts initiated after 8.15 PM on November 10, 2022. BIA account holders deposited their assets into these accounts with the full knowledge that they were taking on some risk in exchange for the potential for higher returns.
blockfi bankruptcy case details
Kaplan emphasized his BIA’s decision, while BlockFi’s user front-end confirmed the successful transfer of funds to customers. Bankruptcy judge spares custodial wallet holders from same fate as BIA customers because [custodials] “The risk or return is not shared.” As a result, custodial ownership of non-estate assets “should not be diluted by those who bear such risks”.
Bankruptcy laws favor the immediate return of funds belonging to customers rather than funds being divided among creditors of the company’s estate. In BlockFi’s case, custodial repayments were delayed due to a dispute over funds held in the company’s interest-bearing accounts. Customers tried to liquidate these funds after November 10 following the suspension of withdrawals and transfers. Blockfi’s BIA holders also tried another transfer on November 18, after the crypto lender made related changes to the app.
In early November, BlockFi froze funds in its interest-bearing accounts as ripples from the collapse ftx Entered the crypto ecosystem. New Jersey-based digital asset lender Finally filed for Chapter 11 bankruptcy On November 28th – a few weeks after the FTX crash.
BIA Customer Attorney Arguments for Equal Favorable Repayment Treatment of Customers as Custodial Wallet Holders
Meanwhile, ahead of Blockfi’s current bankruptcy court BIA decision, a lawyer representing affected customers rejected the alleged repayment optics.
At Monday’s hearing, Deborah Kowsky-Epp of Troutman Paper argued for the inclusion of its BIA customers in any repayment plans. Kovski-App reported that all of its clients attempted to transfer BIA holdings during the interim period between November 10 and November 18. The attorney said that disregarding “the clear language of the Terms of Service” that promises instant transactions would be unfair. Furthermore, Kovsky-Apap suggested that BlockFi discriminated against its customers, who all faced the same situation.
BlockFi trial attorney and representative Michael B. Slade said the company has not yet completed the sale of its assets in other developments. Slade’s revelation came amid reports that some customers received email confirmations confirming the sale of the said properties.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to strip crypto stories down to the basics so that anyone anywhere can understand without a lot of background knowledge. When he is not delving deep into crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
Bitcoin Crypto Related Post