01-09-2023 icon

Bankrupt BlockFi hasn’t tampered with crypto assets since October – Lawyer

By Lucy Adegbe

After filing for bankruptcy in November 2022, BlockFi is yet to withdraw their crypto assets locked in its protocol, the firm’s lawyer has told a U.S. Bankruptcy Court for the District of New Jersey.

The lending and borrowing protocol had filed for bankruptcy shortly after the collapse of the second-largest crypto exchange, FTX.

Joshua Sussberg, a partner at law firm Kirkland & Ellis and representative for BlockFi, said during the second hearing in BlockFi’s Chapter 11 bankruptcy proceedings, “I think the important takeaway here is that there was no situation where insiders were pulling money off the platform on the eve of or anywhere near this bankruptcy file … So this is not the Celsius case where management extracted value on the eve of the file.”

According to Sussberg, BlockFi plans to file its assets and liabilities, along with a statement of financial affairs on Wednesday, which BlockFi has since confirmed. 

The lawyer’s presentation further reveals that shortly after the first hearing in November, the company kicked off a sale process and has reached out to “106 domestic and international potential buyers for some or all of the business.” In addition, the company plans to ask for court approval of bidding procedures at a Jan. 30 hearing.

While Sussberg maintains that no member of the team has withdrawn any funds after Oct. 14 and no withdrawal exceeding 0.2 Bitcoin was made after Aug. 17, he pointed that around $15 million in withdrawals by five members of the management team, including $6 million by CEO Zac Prince, that were categorized as “litigation settlement payment” or tax payments routed through executives.

Subsequently, the U.S. Bankruptcy Judge Michael B. Kaplan also denied a motion by BlockFi, requesting the turnover of Robinhood Markets (HOOD) shares that FTX had pledged to BlockFi as collateral for a loan.

“At this juncture, it’s clear that this court is not in a position to enter any turnover order of any type,” the judge said.