Bankrupt Crypto Lender BlockFi Requests for Approval To Initiate Customer Withdrawals

According to court documents filed on Monday with the U.S. Bankruptcy Court for the District of New Jersey, the cryptocurrency held in BlockFi’s wallets belongs to its customers, and the company had no legal claim to the frozen funds when the platform suspended its operations on November 10.

BlockFi’s request for approval to release the funds comes as the company faces bankruptcy proceedings and works to restructure its debt and assets. The company, founded in 2017 and headquartered in New York, has grown rapidly in recent years, attracting millions of dollars in investments and becoming a leading player in cryptocurrency lending. However, the company’s recent financial struggles have led to the suspension of its operations and the freezing of customer funds.

The motion filed by BlockFi states that the company has no legal or equitable interest in the frozen funds and that the funds should be returned to their rightful owners, the customers. The motion also notes that the company has ensured that customer funds are secure and has adequate insurance to protect against losses.

However, the collapse of FTX, which occurred in early November, had a ripple effect on the entire cryptocurrency market, causing several other companies to struggle as well. 

BlockFi was one of the first companies hit hard by the contagion and ultimately decided to file for bankruptcy protection to restructure its debts and operations.

The decision on whether to approve BlockFi’s request to release customer funds will be made by the U.S. Bankruptcy Court. If approved, releasing the funds would relieve BlockFi’s customers, who have been unable to access their cryptocurrency since the platform suspended operations.

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