BlockFi lawyer tells bankruptcy court that the priority is to 'maximize client recoveries'

BlockFi lawyers said during the crypto lender's bankruptcy proceeding connected Tuesday that the steadfast plans to reopen withdrawals arsenic portion of an effort to "maximize lawsuit recoveries."

A time aft BlockFi filed for Chapter 11 protection, lawyers expressed optimism successful a New Jersey tribunal that the steadfast is successful bully presumption to restructure and salvage the concern done the bankruptcy process.

BlockFi's illness was precipitated by vulnerability to Three Arrows Capital, which went bankrupt earlier this year, and to Alameda Research, the FTX trading limb that borrowed hundreds of millions of dollars from BlockFi. FTX had arranged a rescue program for BlockFi, but that fell isolated erstwhile FTX faced its ain liquidity crisis earlier this period and rapidly sank into bankruptcy.

"We privation to marque definite we get radical backmost arsenic overmuch of their worth arsenic speedy arsenic we can," Josh Sussberg, a spouse astatine Kirkland & Ellis, which is representing BlockFi, told the court.

BlockFi loaned $671 cardinal to Alameda, Sussberg said, and had an further $355 cardinal successful integer assets that are presently frozen connected the FTX platform.

Exposure to some firms prompted lawsuit withdrawals, but it was FTX's program to get BlockFi that yet led it into bankruptcy proceedings, the lawyer said. In July, FTX swooped in to prevention BlockFi by extending a $400 cardinal revolving recognition installation and offering to perchance bargain the beleaguered lender. 

"At the time, 89% of BlockFi shareholders voted successful favour of the transaction," Sussberg said.

In the bankruptcy filing, BlockFi indicated it had much than 100,000 creditors, with liabilities and assets ranging from $1 cardinal to $10 billion. The institution besides listed an outstanding $275 cardinal indebtedness to FTX US, the American limb of Sam Bankman-Fried's erstwhile empire, and BlockFi owes the SEC $30 cardinal stemming from a anterior settlement.

BlockFi boasted beardown regulatory oversight, firm controls and hazard management, the lawyer said. He was making a wide opposition to FTX, which was excoriated by caller CEO John Ray III arsenic having a "complete nonaccomplishment of firm controls."

Compounding BlockFi's situation is hundreds of millions of dollars successful collateral that FTX and Bankman-Fried pledged to the institution arsenic portion of the rescue package. The Financial Times, citing indebtedness documents, reported connected Monday that the collateral is composed of Robinhood stock, which Bankman-Fried purchased earlier this year.

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