Key Points:
- A brawl erupted between BlockFi’s lender and the insolvent digital asset management.
- Creditors said it was the company’s conversion of crypto to fiat during the crash that caused their funds to be lost.
- They also said that it was the company’s poor management process that caused and was a victim of FTX and Alameda.
The creditors dismissed BlockFi’s claim that it was a victim of FTX and Alameda as a false case narrative, blaming the company’s downfall on bad management choices and, later, restructuring agents.
The creditor’s committee said that in the days after the FTX collapse, when crypto markets crashed, BlockFi transferred around $240 million in crypto into fiat, resulting in severe financial losses and probable tax concerns for clients. BlockFi subsequently transferred the money as well as an extra $10 million into Silicon Valley Bank (SVB), which went bankrupt later that year.
“SVB was not a depository institution of sufficient strength to meet the Bankruptcy Code’s protective requirements, prompting the United States Trustee to object to estate money being deposited there,” the filing showed.
But, no one at BlockFi, including the restructuring team, followed through on this, and no bond was issued, according to the creditors. The creditors claimed that BlockFi also used consumer cash to obtain a $30 million insurance policy for its directors and executives.
Bitcoin has risen more than 60% from the November 2022 lows, and creditors claim that approximately $100 million in value was lost as a result of the decision to liquidate then. A significant chunk of this document has been deleted, notably critical passages in which the creditors explain why they feel the BlockFi team participated in a false case narrative.
On Thursday, a court gave BlockFi permission to refund $297 million to clients with non-interest-bearing accounts without paying users who sought to move funds into such accounts at the last minute.
Although the company received $4.7 million from the sale of mining equipment, considerable recoveries are dependent on the firm’s claims against Alameda and FTX, with around $355 million in cryptocurrencies locked on FTX and a $671 million debt to FTX’s subsidiary, Alameda Research.
Earlier, BlockFi said in its wind-down plan filed with the United States Bankruptcy Court for the District of New Jersey that the success or failure of the litigation supporting these allegations would affect consumers who are waiting for their money returned by more than $1 billion.
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Harold
Coincu News
Source: https://news.coincu.com/187785-blockfi-creditors-hotly-controversy/