Defunct cryptocurrency lending firm BlockFi has applied to a court to transfer transaction-only assets in user accounts into stablecoins so individuals can withdraw them. The request marks another step in the company’s efforts to return users’ funds, a process that began in August.
On Aug. 29, BlockFi filed an application with New Jersey Bankruptcy Court authorizing the conversion of so-called “transaction-only” assets into stablecoins. These assets — Algorand, Bitcoin Cash, and Dogecoin — cannot be easily withdrawn, so BlockFi recommends exchanging them all at once for Gemini Dollar (GUSD) or other stablecoins.
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According to the application, the number of transaction-only assets does not exceed 0.5% of all U.S. wallet assets of BlockFi users. Other transaction-only assets such as Cardano, Solana, Avalanche, etc. are held solely by BlockFi International.
A committee of court-approved BlockFi creditors upheld the company’s request.
In 2022, BlockFi becomes one of several companies seeking Chapter 11 bankruptcy protection in the US, along with FTX, Celsius Network and Voyager Digital. In November 2022, customer withdrawals will be temporarily suspended. On Aug. 16, the court authorized the company to open withdrawals for the first time in nine months.
The court also conditionally approved BlockFi’s restructuring plan. The firm prioritized recovering funds from entities such as Alameda Research, FTX, Three Arrows Capital, Emergent and Core Scientific. Last week, BlockFi’s legal team sought to block FTX’s attempt to recover hundreds of millions of dollars to repay creditors.
According to estimates in April 2023, BlockFi owed more than 100,000 creditors as much as $10 billion, including $1 billion to its three major creditors, and $220 million to bankrupt crypto hedge fund 3AC.
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