BlockFi customers get funds back, but $375M slips through their fingers

As part of the file from bankruptcy of the lender BlockFithe justice gave its agreement at reimbursement from 300 million dollars d’assets held on wallets in custodial. On the other hand, the judge opposes the payment from 375 million kept on interest-bearing accounts.

BlockFi was swept away by the crypto contagion triggered by the collapse of FTX. The lender filed for bankruptcy at the end of November 2022. The management of the bankrupt firm’s assets is now in the hands of the courts.

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For the customers of the platform, it is thus the wait and the anguish. However, they have just received a positive signal. Judge Michael Kaplan has just rendered a decision (partially) favorable to their interests.

Omnibus wallets owned by customers

Magistrate authorizes redistribution of $300 million held in custodial accounts.

The court finds that all digital assets held by the debtors in omnibus portfolios are indeed the property of the customer and not property of the bankruptcy, subject, of course, to possible avoidance and recovery rights,” the judge justified.

On the other hand, for holders of interest-bearing accounts or BIAsit is the cold shower. The clients were hoping to recover the use of 375 million dollars of assets held in these accounts. These assets have been frozen since last year.

The BIA account holders deposited their assets in these accounts knowing full well that they were taking on certain risks in exchange for the possibility of a better return,” the judge argues.

BIA account holders aware of risks

The magistrate finds that holders of wallets of the type custodial “have not shared in that risk or return and should not have their ownership of non-heritage property diluted by those who have taken such risks.”

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Our American colleagues point out that bankruptcy law protects the rights of customers. Thus, funds deemed to belong to them are likely to be returned immediately. The other assets will be distributed among the various creditors.

In the file BlockFithe court thus makes a clear distinction between crypto-assets in custodial and those invested in the platform’s BIA accounts. Customers had attempted to recover their investments between November 10 and 18, before they were frozen.

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