BlockFi files amended Chapter 11 plan and seeks exclusivity extension

By Sarah Lizee

Olympia, Wash., May 17 – BlockFi Inc. has filed an amended Chapter 11 plan and is seeking an extension of its exclusive periods to file and solicit votes on the plan, according to documents filed with the U.S. Bankruptcy Court for the District of New Jersey.

The company asked the court to extend the exclusive plan filing period through Aug. 23 and the exclusive solicitation period through Sept 30.

A hearing on approval of the disclosure statement is scheduled for June 20.

The company said in a letter to creditors that the primary driver of client recoveries will be litigation against FTX, Alameda, 3AC, Emergent and Marex. Previously, the company was considering a potential sale of the business.

The company said the results of that litigation may achieve prospective high-end recoveries exceeding 90% for certain classes of claims.

According to a liquidation analysis, client recoveries will be increased or decreased massively, with total swings in client recoveries potentially exceeding $1 billion, depending on whether BlockFi can succeed in these litigations.

FTX and Alameda entities, along with 3AC, have filed their own claims against BlockFi, seeking to further deplete billions of dollars in value out of the estate and away from clients, BlockFi said.

“The proposed plan is also the fastest way to return the funds currently held in wallet accounts back to customers, in kind, as quickly as possible,” BlockFi told creditors in the letter.

BlockFi said the proposed plan will also waive all preference claims, meaning BlockFi won’t attempt to hold back assets held in wallets, and will not initiate lawsuits to claw back any assets that were moved off of the BlockFi platform over the last several months that are currently in the possession of clients.

In its exclusivity extension motion, BlockFi said the debtors need to retain control of the plan process in order to maximize client recoveries through the multiple legal proceedings.

“The proposal of competing, alternative plans would put the debtors into an adversarial posture within their own Chapter 11 cases, and the associated discovery and litigation surrounding these competing plans would alienate and divide the very people needed to defend the company and work to maximize recoveries in those proceedings,” the company said.

Based in Jersey City, N.J., BlockFi is a crypto financial services company. The company filed bankruptcy on Nov. 28 under Chapter 11 case number 22-19361.

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