Bankrupt BlockFi Seeks to Return Assets
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An editor at Coincrop
21 Dec 2022 | 4 min read
lockFi, a cryptocurrency lender caught in the midst of controversy, has submitted an appeal to an US court requesting to release its users' digital assets that have been frozen in their wallet accounts.
On December 19, a motion was officially submitted to the United States Bankruptcy Court for the District of New Jersey, as indicated in an available document. The ailing lender appealed to the court for permission to respond only to requests from their wallet account holders.
Reminisce on the fact that BlockFi was forced to shut down withdrawals November 11 as a result of FTX's bankruptcy and its aftermath. After the Terra-Luna ecosystem collapse created liquidity issues, FTX stepped in and provided a $400 million revolving credit facility to the lender.
In the aftermath of FTX's collapse, the cryptocurrency lender sought to regain all monies owed by its associates and particularly FTX and related organizations through a voluntary Chapter 11 bankruptcy protection filing.
BlockFi has officially requested for court supervision to allow them to continue operations as usual. With approval, the firm will be able to pay their employees competitive wages and benefits without restrictions.
The troubled lender has petitioned the court for permission to release the cryptocurrencies contained in its wallet accounts.
According to BlockFi's Wallet Terms of Service (Toss), users always retain ownership rights on any cryptocurrencies they deposit into their wallet accounts.
“The title to the cryptocurrency held in your BlockFi Wallet shall at all times remain with you and shall not transfer to BlockFi. BlockFi shall not sell, transfer, loan, hypothecate or otherwise alienate cryptocurrency held in your BlockFi Wallet unless specifically instructed by you,” the Terms of Service read.
A whopping $290 million in pending withdrawals is currently held up within wallet accounts. BlockFi noted that these cryptocurrencies are not a part of the bankruptcy estate and should be returned to clients, unlike those stored in interest-bearing accounts.
To ensure that users can properly view the assets and transactions in their accounts, the lender asked for an updated user interface. This would make it possible to accurately reflect these details as of when operations ceased.
BlockFi has recently reported that, as of the Platform Pause Time Stamp, more than $290 million in withdrawals have been requested from wallet accounts.
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