BlockFi Requests Court to Allow Crypto Withdrawal to Clients


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(Kitco News) – BlockFi, a cryptocurrency lending platform which declared bankruptcy on November 28 after the collapse of FTX has petitioned for the court to allow customers to access their frozen digital assets.

BlockFi filed the motion with the New Jersey Bankruptcy Court on December 19, asking the court to permit clients to withdraw funds from their wallet accounts, which have been frozen since November 10.

“Debtors have always prioritized doing the right thing by their clients,” BlockFi contributed to the motion. “Essentially, this means adhering to the terms of service that govern the relationship between Debtors and their customers. By making this motion, the Debtors are taking steps to honor this commitment, permitting clients to have access to the digital assets that are theirs and that were in their Wallet Accounts at the time of the Platform Pause.”

BlockFi mentioned that the title to the cryptocurrency in BlockFi is subject to its terms of service. “Debtors have no legal or equitable interest in the cryptocurrency that was present in the Wallet Accounts as of the Platform Pause, and clients should be able to withdraw such assets from the platform if they wish,” the company agreed.

In an email sent to customers and shared on Twitter, BlockFi reiterated, “We are confident that clients are the rightful owners of the digital assets in their BlockFi wallet accounts,” The motion was deemed an “important step towards our goal of returning assets to customers through our Chapter 11 cases.”

The motion demonstrates that the crypto lender, embattled, is honoring its promises made on Nov. 28 “to stabilize its business and provide the Company with the opportunity to consummate a comprehensive restructuring transaction that maximizes value for all clients and other stakeholders.”

As BlockFi has been part of its restructuring effort and is striving to recover any funds owed by it to various counterparties including FTX, its related corporate entities, and others. This process may take a while due to the ongoing bankruptcy proceedings at FTX.

In a client update published on November 28, BlockFi said that “our team has explored all the strategic options and alternatives available to us, and has remained focused on our primary goal of doing the best we can for our clients. These Chapter 11 cases will enable BlockFi to stabilize the company and give BlockFi an opportunity to complete a reorganization plan to maximize value for all stakeholders including our valued customers.

The court is holding a hearing to decide whether or not to grant the motion to US account holders on January 9. The Bermuda High Court will hear a separate hearing to authorize withdrawals from BlockFi wallet accounts outside the platform on January 13.

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