Disgruntled BlockFi creditors have asked the court to hand over the bankrupt crypto lender’s assets to new management as tensions mount over proposed restructuring plans.
One of the victims of the FTX collapse, BlockFi, is working on its restructuring plan, but its creditors’ committee has expressed a lack of confidence in the leadership team.
Creditors Lack Confidence
In a filing, the Official Committee of Unsecured Creditors asked the court to give BlockFi’s assets to the hands of new management. The creditors wrote:
The Debtors did not manage their affairs pre-petition in a way that gives the Committee any confidence in their leadership (quite the opposite, in fact), and the Debtors have not managed their affairs post-petition in a way that gives them any confidence going forward (quite the opposite, in fact)
BlockFi Accused of Mismanaging Funds
The creditors also allege the executives and chief executive Zach Prince mismanaged customers’ funds. In particular, the filing mentioned Prince cashed out $10 million in the preference period.
After the bankruptcy filing, BlockFi received court approval to give its staff $10 million as a bonus.
When BlockFi filed for bankruptcy, it had $256.9 million in liquid funds. But, according to creditors, the crypto lending company sold $240 million worth of cryptocurrency and converted it to fiat before filing for bankruptcy.
Creditors believe that by selling almost all the crypto in November, BlockFi lost more than $100 million in the upswing that followed.
Also, creditors accused BlockFi of buying a 30 million directors and officers (D&O) insurance policy with customers’ funds. The insurance protects directors and officers if they were sued in court action relating to BlockFi.
The response from the creditors comes after a “tweet storm” from BlockFi over the weekend. The crypto lending protocol claimed that recovery from FTX and Alameda research would be the largest driver for customers to regain their funds.
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Source: https://beincrypto.com/blockfi-creditors-object-restructuring-plan/