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On Monday, BlockFi, a crypto lending firm, alerted its customers concerning the withdrawal of digital assets held in BlockFi Wallet accounts. BlockFi is among several crypto lending platforms that went bankrupt after the FTX exchange demise last year. The lending firm further suspended withdrawals, as it filed for Chapter 11 Bankruptcy protection late the previous year.
BlockFi says customer withdrawals could start this summer https://t.co/I9RJEuQT7Y
— The Block (@TheBlock__) June 12, 2023
However, the company, via an email, has alerted its customers that it expects to finish work and necessary testing to allow its clients to start getting their money back this summer. BlockFi stated:
At that time, we will be in a position to begin allowing clients to withdraw digital assets held in BlockFi Wallet accounts that are not subject to potential preference claims.
The lending firm has notably alerted that withdrawals must be made in batches, and only eligible clients will receive an email from the platform. Meanwhile, the company recommends users set up third-party wallets to withdraw funds.
Crypto Lending Firm Background
Earlier last year, BlockFi took a financing package from FTX worth up to $400 million. A rescue package was provided as a bailout to help the struggling crypto exchange weather a liquidity constraint caused partly by its exposure to the collapse of the TerraUSD stablecoin.
Further, the Terra crash misled about $500 billion TerraUSD (UST) in market value in the larger crypto markets. As part of its white knight transaction, FTX assured BlockFi continued access to capital for one year and granted itself the option to buy the struggling company.
On the other hand, the crypto lending firm’s adviser, Mark Renzi, claimed in court documents that Three Arrows Capital was one of BlockFi’s top debtor clients. In addition, the Singapore-based hedge fund had made significant investments in TerraUSD.
Although BlockFi’s summertime demise was delayed thanks to FTX’s credit facility, in the end, neither company could avoid the growing effects of the crypto crisis.
What Can BlockFi Customers Expect Ahead?
Early last month, a United States judge ordered the bankrupt crypto lender to return $297 million to customers with deposits held in its Wallet program, according to a Reuters. However, the return of funds does not apply to BlockFi Interest Accounts (BIA) users. According to Bankruptcy Judge Michael Kaplan, funds in BIA accounts were used by BlockFi for its lending business and therefore are property of the bankruptcy estates. This means the funds will later be used to repay all creditors.
BlockFi has over 100,000 creditors, according to their bankruptcy declaration. With the baby steps the lending firm is making toward its recovery, users can now have a little faith in recovering their funds from BlockFi wallet accounts.
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