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Bankrupt Crypto Lender BlockFi Transitioning Distribution to Coinbase
Recently, bankrupt crypto lending platform BlockFi made an announcement regarding its future plans. The company disclosed that it would be closing down its web platform by the end of May, opting instead to rely on Coinbase as its primary distribution partner moving forward. This decision comes as part of BlockFi’s restructuring efforts amidst its ongoing bankruptcy proceedings.
Distribution Process
The transition to Coinbase as a distribution partner ensures that BlockFi Interest Account (BIA) holders, Retail Loan clients, and Private Clients will still be able to access their funds. Customers who are eligible to transact in crypto will have the option to access their funds in kind, provided they have an open or approved Coinbase account.
However, there are specific conditions that must be met for customers to access their funds in crypto. Those who did not withdraw their crypto from BlockFi’s web platform by April 28 or failed to verify their identity by May 10 will be required to create a Coinbase account to proceed. Customers who are unable to create a Coinbase account will receive their funds in cash instead.
It is important to note that BlockFi has not entered into partnerships with any other crypto companies for distributions. The company has cautioned users about potential scams from malicious entities claiming otherwise. BlockFi and Coinbase will directly contact users on file with detailed instructions regarding the distribution process.
FTX Funds and Future Distributions
As part of the bankruptcy proceedings, the plan administrator may facilitate distributions through Coinbase, specifically concerning funds recovered from FTX. BlockFi was set to receive nearly $875 million from FTX, with the first $250 million being prioritized for distribution. The remaining amount is contingent on FTX’s ability to fulfill its obligations to customers in its own bankruptcy case.
BlockFi highlighted the significance of Coinbase’s involvement in enabling crypto distributions for users. Without Coinbase’s assistance, the plan administrator would be limited to making cash distributions in the future, rather than providing funds in cryptocurrency.
Background and Bankruptcy Details
BlockFi initially suspended withdrawals on November 10, 2022, citing uncertainty surrounding FTX’s separate bankruptcy as the primary reason for its platform shutdown. Subsequently, BlockFi entered bankruptcy proceedings, revealing FTX as its second-largest creditor during the process.
In October 2023, BlockFi successfully emerged from bankruptcy and commenced the process of repaying users this year. Conversely, FTX remains mired in bankruptcy proceedings, with ongoing uncertainties surrounding its financial capabilities.
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