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BlockFi, the crypto lending platform that faced bankruptcy following a tumultuous period, is back on its feet and ready to fulfill its obligations to its creditors.
BlockFi Announces Wind Down
On Tuesday, BlockFi emerged from bankruptcy, announcing its intent to commence the gradual cessation of operations and the gradual return of crypto assets to its customers. This comes 11 months after the platform was impacted by the cryptocurrency industry's upheaval triggered by FTX's collapse. It also means that the platform will finally be able to initiate the retrieval of assets from entities that owe it funds, such as Three Arrows Capital (3AC) and FTX.
As per the latest information provided in an Oct. 24 blog post, the company has announced that withdrawals are now available to the majority of its Wallet customers. The team has issued specific instructions to Wallet customers who wish to access their assets. To facilitate withdrawals, customers are advised to log in to the BlockFi app and submit their withdrawal requests.
Estimated Customer Reimbursements
BlockFi has provided estimates concerning the reimbursements for customers with interest-bearing Earn accounts. These account holders can expect to receive anywhere between 39.4% and 100% of the total value held in their accounts. It's worth noting that while Wallet customers can currently withdraw their funds, BIA and Loan customers will have to wait a bit longer to receive their repayments.
For BIA and Loan customers, the company has outlined a repayment plan that aligns with the bankruptcy proceedings. The initial distributions for these customers are anticipated to occur in early 2024. Subsequent distributions will follow, but the actual amounts dispersed will be contingent on various factors, including BlockFi's progress in the FTX bankruptcy litigation.
Crypto Lenders and the Pandemic Boom
The crypto lending industry, often dubbed the crypto world's equivalent of traditional banks, experienced substantial growth during the pandemic. These lending platforms attracted retail customers with the promise of double-digit interest rates in exchange for their crypto deposits. Unlike conventional banks, crypto lenders weren't subject to capital or liquidity requirements, and this lack of regulation left them exposed when collateral shortages led to significant losses for both the platforms and their users. BlockFi was one such crypto lending platform that experienced a gold rush in the aftermath of the pandemic.
However, things started going south in mid-2022 when Terra's stablecoin suffered a collapse. FTX came to BlockFi's rescue with a $400 million credit line, but this move ultimately backfired when FTX itself declared bankruptcy in November, dragging BlockFi down with it.
