Navigating the Aftermath: BlockFi’s Bankruptcy Email Reveals Next Steps for Customers

A Comprehensive Look at the Email Communication that Unveils BlockFi's Post-Bankruptcy Path for Its Clients

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BlockFi, one of the prominent names in the cryptocurrency lending space, has emerged from bankruptcy, and its subsequent wind-down process is now in motion.

This development has sent shockwaves through the crypto community, prompting concerns about the broader implications for the industry.

BlockFi’s Bankruptcy and Wind-Down Process

BlockFi’s recent bankruptcy filing sent shockwaves through the cryptocurrency community. The company cited turbulence in the cryptocurrency industry following the collapse of FTX as a significant factor in its downfall.

The ensuing wind-down process involves selling assets and settling obligations, with the promise to return crypto assets to customers over the course of 11 months.

However, customers may experience delays in accessing their funds during this period. BlockFi has assured its customers that their assets will be protected, and efforts will be made to minimize disruptions.

Furthermore, the company is working on a plan to transfer customer accounts to another service provider, seeking a smoother transition.

Estimated Recovery for Customers

Customers with interest-bearing Earn accounts are estimated to receive between 39.4% and 100% of the value in their accounts.

The outcome of the FTX bankruptcy, to which BlockFi is linked, will influence the final amounts received by customers with BlockFi Interest Accounts and Retail Loans.

Withdrawals are currently available to almost all of BlockFi’s Wallet customers, while repayment for customers with BlockFi Interest Accounts and Retail Loans is set to occur over the coming months, with amounts varying based on the FTX bankruptcy outcome.

Reasons for BlockFi’s Collapse

BlockFi’s woes were amplified by its loans to FTX’s sister firm, Alameda. FTX’s founder, Sam Bankman-Fried, currently facing a trial for fraud in Manhattan, added to the company’s woes.

This “episode” underscores the substantial risks faced by crypto lenders in an industry that boomed during the pandemic, luring retail customers with enticing double-digit rates for crypto deposits.

Unlike traditional lenders, crypto lenders aren’t bound by capital or liquidity requirements, exposing them to substantial losses in times of crisis.

Crypto Lenders and the Industry

Crypto lenders, often viewed as the de facto banks of the crypto world, witnessed a remarkable surge in popularity during the pandemic, largely due to their attractive interest rates.

However, this episode emphasizes the risks they and their customers face in a largely unregulated industry.

Unlike traditional lenders, crypto lenders operate without the safety nets of mandatory capital and liquidity requirements, making them susceptible to significant losses during market downturns.

BlockFi’s bankruptcy and the subsequent wind-down process have brought to light the fragility of the crypto lending industry.

Customers and industry observers are keenly watching the unfolding events, and it remains to be seen how the lessons learned from this episode will shape the future of crypto lending and its regulatory landscape.

Here’s the full email BlockFi customers received:

BlockFi is pleased to announce that its bankruptcy plan (the “Plan”) is effective and the company has emerged from bankruptcy as of October 24, 2023 (the “Effective Date”).

BlockFi’s management, advisors and other stakeholders worked diligently over the past 11 months to reach this critical milestone. We are proud to say that BlockFi reached its Effective Date more quickly and efficiently than many other retail crypto companies.

What is Emergence?

After Emergence, BlockFi can officially begin enacting the actions detailed in the Plan, including repaying its creditors according to the terms of the Plan. As a reminder, the Plan will allow the company to do the following:

When will I get my digital assets returned to me?

Wallet customers: Withdrawals are currently available to nearly all Wallet customers. If you have not done so already, please login to to submit a withdrawal request. More information can be found in our Wallet Withdrawal FAQs:

BIA and Loan customers: Now that BlockFi has emerged from bankruptcy, the company can begin the wind-down as outlined in the Plan. The Plan Administrator and remaining employees are working as quickly as possible to prepare BlockFi for an initial distribution of available assets from the wind-down estate. Further updates on timing for this initial distribution will be sent in the coming months. We are aiming to begin initial distributions in early 2024. Any subsequent distributions will be dependent on many factors, including most notably any recoveries from FTX and its affiliates.

What do you need to do

For clients holding funds in BlockFi Interest Account (BIA) and Retail Loans: Over the coming months, you will receive an email prompting you to withdraw your funds based on the recovery amounts approved by the Plan. The company expects that this will be the first wave of distributions, which will be followed by additional distributions. The amount of subsequent distributions is subject to many factors, but primarily BlockFi’s treatment in the FTX bankruptcy cases.

For clients holding funds in BlockFi Wallet: At this time, the company is working through distributing funds to clients with assets in the BlockFi Wallet product. If you are eligible to withdraw and have not taken action yet, please submit a withdrawal request to receive your funds in crypto as soon as possible, before the Wallet withdrawal window closes on December 31, 2023 at 11:59 PM UTC.

Once the Wallet withdrawal window has closed, BlockFi will work to open withdrawals for an initial distribution of estate funds to BIA and Retail Loan holders.

As always, client communications will only be sent via official email channels, on social media @BlockFi, or via our claims agent, Kroll ([email protected]).

We are committed to keeping you informed about operational updates as they arise.



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