Starting in July, bankrupt crypto lender BlockFi declared on social media platform X that it will begin interim bitcoin distributions via Coinbase. Over the next months, the distributions will be handled in stages; qualified clients will be informed by email on file through their BlockFi account.
BlockFi said in its post, “The distributions will be processed in batches in the coming months, and eligible clients will receive a notification to the BlockFi account email on file.”
For BlockFi, who filed for Chapter 11 bankruptcy protection in November 2022, the announcement marks a major turning point. The lawsuit tracked the fall of Sam Bankman-Fried’s cryptocurrency exchange FTX and the related business Alameda Research, to whom BlockFi had made large loans.
BlockFi CEO Weighs In
BlockFi CEO Zac Prince said during Bankman-Fried’s trial in October that, had the firm not lent hundreds of millions to Alameda Research, it would have avoided bankruptcy. “It appeared strong,” Prince said of Alameda’s financial situation, noting that several billion dollars worth of assets seemed to surpass the debt. The truth was somewhat different, though. Alameda returned only $150 million after BlockFi asked that crypto assets valued $850 million be returned.
The financial crisis resulted in BlockFi’s later that month bankruptcy declaration. BlockFi emerged from bankruptcy last October following almost a year with a proposal to halt operations and divide its remaining assets. That strategy calls for this interim distribution via Coinbase.
Stay Alert
BlockFi has had a difficult path through bankruptcy. The company closed its web portal in May and has since underlined that all client communications will happen via official email channels, its social media @BlockFi, claims agency Kroll, their claims distribution partner Digital Disbursements, or from Coinbase. BlockFi has advised customers to stay alert against efforts at fraud by outside criminal actors.
With this new wave of interim distributions, BlockFi’s winding-down procedure advances. For many customers, this evolution provides a ray of hope among the more general instability that has defined the crypto market for the previous year.
Alameda Research and FTX Collapse
BlockFi’s demise is intimately related to the larger fall-off of Alameda Research and FTX, both of which were major participants in the crypto market. Alameda Research’s failure to meet BlockFi’s expectations highlighted the flimsiness and interdependence of several cryptocurrencies. Based on what seemed to be a strong financial situation, BlockFi’s large loans to Alameda proved to be a major mistake.
BlockFi’s interim distributions via Coinbase are a vital attempt to repay assets to its creditors as business winds down. Expected to take place in phases over several months, the process will be widely followed by both past customers and industry analysts.
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