The bankrupt crypto lender, BlockFiwithdrew his liquidation plan May 13 following a strict directive from a US bankruptcy court. The court order required the issuance of a “corrective letter“, acknowledging that the controversial documents had been disclosed prematurely without the consent of the court. This revelation brings a new wave of uncertainty to the already tumultuous saga of BlockFi’s financial situation.
A premature movement and its repercussions
According to the New Jersey bankruptcy court judge’s emergency order, Michael B. Kaplanthe disputed documents had projected claims of around $1 billion against trading counterparties, including crypto exchange FTX and its trading arm Alameda, would play a pivotal role in repaying creditors. “The purpose of the disclosure statement is to provide clients with the information they need to make an informed decision about whether to vote to accept our plan.,” BlockFi tweeted.
A heritage in difficulty in conflict with creditors
Since filing for bankruptcy in November, the assets of BlockFi was at the heart of a contentious confrontation with its creditors. They blame the company’s downfall on its mismanagement and controversial restructuring plans, which have come under scrutiny since May 15. However, the court-mandated letter — shared by BlockFi on its official Twitter — clarifies that the court has not yet approved the “the heritage’s ability to solicit acceptance of its plan“.
Lingering Discontent and Looming Litigation
The corrective letter further underlined that creditors and other stakeholders are not in favor of the reorganization plan. THE Official Committee of Unsecured Creditors expressed concern saying that the plan “provides releases from legal claims against, among others, current and former directors and officers of BlockFi who have committed gross misconduct harmful to BlockFi and its customers“. As the tense situation continues to unravel, all eyes are on the next bankruptcy hearing, scheduled for June 20.
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