In a new development, embattled crypto firm, BlockFi has been given more time to find its bankruptcy exit plan. The deadline for its Chapter 11 plan has been extended by the judge in charge of the case to the 15th of May, 2023. Things had gone south for BlockFi after the collapse of FTX. FTX was one of its major partners, and it had caused a huge fuse, leading them to file for Chapter 11 of bankruptcy. 5 months after the BlockFi bankruptcy case was filed, the firm has not developed an exit strategy yet. So in the recent court proceedings, the judge handling the case extended the deadline for the exit plan to be presented. BlockFi has, from now to mid-May, to summit the exit plan.
Joshua Sussberg, BlockFi’s attorney, said the company is exploring a potential sale of some of its major assets to raise more money for its exit plan. While BlockFi withdrawal from the crypto scene comes as a huge hit, creditors and other customers need to be settled. BlockFi's attorney says that from the money they raise from the sale of their assets, they might even enter a restructuring deal. Michael Kaplan, the judge behind the BlockFi bankruptcy case, reportedly said that the crypto firm needed more time to develop a bankruptcy exit plan if the case was to be continued smoothly. In the recent hearing, the judge said the two weeks given BlockFi was more than enough for them to put up what is required of them.
Why was the deadline Extended
Immediately after the FTX collapse, the effects began to show on several crypto firms affiliated with it. On the 28th of November, 2022, BlockFi filed for bankruptcy, which was shortly after FTX filed theirs. From a legal standpoint, debtors involved in a bankruptcy case are meant to propose a Chapter 11 plan in the first 120 days of the filing, but BlockFi didn't. Instead, they filed a motion appealing to the judge to give them an additional 90 days to June 26th.
According to the BlockFi lawyers, "Given the size and complexity of these Chapter 11 cases, much work remains." BlockFi is really in a deep mess as they owe more than 100,000 creditors up to $10 billion. As part of the bankruptcy procedure, they needed to come up with a plan of how they were going to pay off these creditors. While BlockFi has generated a little $4.6 million in sales from auctioning its crypto mining tools, they agreed in March to pay $100,000 to California creditors
California Department of Financial Protection & Innovation announced the agreement on Twitter, saying, "Californian @BlockFiusers: BlockFi to refund over $100k after failing to notify borrowers about halting repayments post-FTX crash. The motion was filed, with a hearing set for April 19, 2023. Updates to follow."
In a follow-up update, the department said," The Department of Financial Protection and Innovation (DFPI) today announced that New Jersey-based crypto lending platform BlockFi Lending LLC (BlockFi) agreed to direct its servicer to provide Californians more than $100,000 in refunds, subject to the bankruptcy court’s approval."
"The refunds stem from BlockFi’s conduct following the crash of the FTX cryptocurrency exchange," they added. All eyes would be on BlockFi and the court to know the next steps once the deadline for the bankruptcy exit plan elapses.