BlockFi Seeks Court Approval to Convert Trade-Only Assets into Stablecoins for User Withdrawals

4:01 pm
August 30, 2023

BlockFi, a bankrupt cryptocurrency lending company, has filed an application with the United States Bankruptcy Court to convert “trade-only” assets from users’ accounts into stablecoins, allowing them to withdraw their funds. The court-recognized BlockFi creditors’ committee has supported this motion. BlockFi began the process of returning users’ funds in August after receiving permission from the court to open withdrawals.

Attempts to Enable User Fund Withdrawals

The application states that the trade-only assets being converted represent less than 0.5% of the total US wallet assets held by BlockFi members. BlockFi International manages separate holdings of additional trade-only assets, such as Cardano, Solana, and Avalanche. BlockFi filed for Chapter 11 bankruptcy protection in the US in 2022, and since then, it has temporarily prevented customers from making withdrawals. However, on August 16, the court granted permission for withdrawals to resume.

The court has conditionally approved BlockFi’s restructuring plan, prioritizing funds from companies like Alameda Research, FTX, Three Arrows Capital, Emergent, and Core Scientific for recovery by the corporation. Previously, BlockFi’s legal team attempted to impede FTX’s efforts to recover hundreds of millions of dollars to cover its debts.

FAQ

  • What is BlockFi’s request to the court?
  • BlockFi has requested permission to convert “trade-only” assets from users’ accounts into stablecoins so that they can withdraw their funds.

  • Which court is handling BlockFi’s application?
  • The application was submitted to the District of New Jersey of the United States Bankruptcy Court.

  • What assets are included in the conversion request?
  • The assets requested for conversion into stablecoins include Dogecoin, Bitcoin Cash, and Algorand’s native token.

  • Why did BlockFi halt customer withdrawals?
  • BlockFi temporarily barred customer withdrawals after filing for Chapter 11 bankruptcy protection in 2022.

  • Who supports BlockFi’s motion?
  • The court-recognized BlockFi creditors’ committee has backed the motion to convert trade-only assets into stablecoins.


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