BlockFi, a well-known cryptocurrency lending platform, has made the news again due to recent developments. In November 2022, the company filed for Chapter 11 bankruptcy protection. However, a US judge has now authorized the company to refund $297 million to customers who had deposited funds in its Wallet program.
Although this digital asset is returning $297 million to its customers, there are some limitations to this refund. Customers who have BlockFi Interest Accounts (BIA) will not be eligible to receive the refunded funds.
This is because the funds held in BIA accounts were utilized by BlockFi for lending activities, meaning they are considered assets of the bankruptcy estate. Therefore, these funds will be used to repay all creditors at a later stage.
Bankruptcy Judge Michael Kaplan has ruled that customers with Interest Accounts (BIA) who tried to transfer funds to Wallet accounts will not receive a refund at this time. This means that interest-bearing accounts will suffer a significant loss.
It is worth noting that around November 11, 48,000 customers attempted to transfer $375 million from their BIA accounts to Wallet accounts. However, the company had already ceased all transfers on November 10 at 8:15 pm, preventing these transfers from going through.
Bankruptcy Judge Michael Kaplan stated that the user interface did not accurately reflect these transactions. According to court documents, BlockFi reported that approximately $292 million worth of assets were stuck on the platform because customers tried to move them after the halt. However, BlockFi is now authorized to cancel these transactions.
BlockFi Wallet Customers Exempted: Understanding the Ruling
Custodial accounts in BlockFi maintained their ownership rights and were not affected by the halt of transfers. As a result, their owners chose to move their funds into a more secure digital wallet to safeguard their assets. This gave them greater control and protection over their assets during that time.
udge Kaplan has given a favorable ruling for BlockFi and its custodial account holders. As a result, the crypto lending platform has until May 15 to present its plan to exit bankruptcy.