BlockFi, a crypto lending platform that filed for Chapter 11 bankruptcy protection in the US last year, has asked the court to allow it to convert some of its users’ crypto assets into stablecoins. The move is part of the company’s efforts to return funds to its creditors, which it started in August.
BlockFi Firm on Their Plan to Give Funds Back to Creditors
According to a court filing on Aug. 29, BlockFi wants to exchange certain crypto assets that are only available for trading on its platform, such as Algorand, Bitcoin Cash, and Dogecoin, into Gemini Dollar (GUSD) or other stablecoin.
BlockFi seeks court approval to convert trade-only assets into stablecoins 🧐
— Sir Kunt • Crypto & NFT (@SirKunt) August 30, 2023
The company claims that these assets, which account for less than 0.5% of all US wallet assets of BlockFi users, are difficult to withdraw and hence need to be converted.
The Committee of BlockFi creditors, which represents the interests of over 100,000 creditors who are owed up to $10 billion by the company, supported the request. The court has not yet ruled on the application.
BlockFi is one of several crypto lending firms that sought bankruptcy protection in the US in 2022, along with FTX, Celsius Network, and Voyager Digital. The company faced liquidity issues after losing hundreds of millions of dollars in a series of margin calls triggered by a market crash in May 2022.
In November 2022, BlockFi temporarily suspended withdrawals for its clients. On August 16, the court authorized the company to resume withdrawals for the first time in nine months. The court also conditionally approved BlockFi’s restructuring plan, which prioritizes recovering funds from entities including Alameda Research, FTX, Three Arrows Capital, Emergent, and Core Scientific.
Last week, BlockFi’s legal team tried to block attempts by FTX to retrieve its funds from the company to pay back its own creditors. FTX is one of the largest creditors of BlockFi, with a claim of over $300 million. The case is still ongoing and the outcome is uncertain. BlockFi’s users and creditors are hoping for a fair and timely resolution.
