Nadrich & Cohen is actively retaining clients who have lost crypto assets due to the negligence and/or fraud of BlockFi.
Cryptocurrency exchange BlockFi recently filed for Chapter 11 relief in bankruptcy court. There had been warnings from BlockFi employees regarding credit risks. However, executives with BlockFi ignored these warnings, misrepresenting BlockFi’s portfolio risk to customers.
The Securities and Exchange Commission (SEC) charged bankrupt crypto lender BlockFi Lending LLC with failing to register sales and offers of their retail crypto lending product, and also stated that BlockFi made a misleading, false statement on its website for over two years regarding the risks involved with its lending activity and loan portfolio. The SEC also found that BlockFi operated as an unregistered investment company for over 18 months.
While BlockFi blames its problems on FTX and the volatility of crypto markets, the company has agreed to pay $100 million worth of penalties stemming from its violations of federal securities laws. BlockFi also agreed to cease unregistered offers and sales of its lending product, BlockFi Interest Accounts, through which investors lent crypto to BlockFi in exchange for a promise of a variable monthly interest payment. The company also agreed to try to bring itself into compliance with the Investment Company Act, and agreed to an order stopping it from violating registration and antifraud provisions from the Securities Act.
BlockFi, at the very least, appears to have downplayed its portfolio risks while misrepresenting their financial strength. In addition, it appears that BlockFi may have been little more than a complicated Ponzi scheme which stole billions of dollars from customers.
Call us today for a free consultation if you or a loved one lost cryptocurrency due to BlockFi’s negligence or fraud. You may be entitled to financial compensation, and we won’t charge you a fee until and unless we obtain compensation for you.
Don’t hesitate; call us today. The deadline to file claims in BlockFi’s bankruptcy is March 31, 2023 at 5 PM ET. We can help you file a proof of claim to help safeguard your interests in light of BlockFi’s Chapter 11 reorganization.
Help With BlockFi’s Bankruptcy
BlockFi filed a motion in order to let customers withdraw assets that the corporation doesn’t legally own but simply stored in BlockFi systems. Customers will likely welcome this motion following their assets being blocked when BlockFi filed for bankruptcy protection in November 2022.
The BlockFi attorneys at Nadrich & Cohen know how this motion may create additional confusion for stakeholders worried about their assets which have been frozen.
When BlockFi filed for bankruptcy, it shook up the crypto industry and market, especially since it came hot on the heels of the FTX collapse involving Sam Bankman-Fried and Alameda Research getting involved in federal complaints of fraud. BlockFi claimed that one reason they had to file for bankruptcy was they were significantly exposed to FTX.
BlockFi has been reported to owe debt to nearly 100,000 creditors.
If you are worried about how BlockFi’s bankruptcy might impact you, it might help for you to get the help of our experienced lawyers. Call us today for a free case evaluation to learn more regarding how we can assist you.
BlockFi’s value was $3 billion in March of 2021. However, in February 2022, BlockFi was penalized by the SEC for violation of the Investment Company Act of 1940, as well as for not registering details regarding its cryptocurrency products.
FTX offered to buy BlockFi for as much as $240 million in July of 2022. BlockFi was moving its assets to FTX after the option and also provided Alameda Research with loans. In a July 2022 report, BlockFi announced they possessed client assets worth $3.9 billion. BlockFi’s stability following the SEC’s penalty as well as its initial partnership with crypto exchange FTX provided the sense that security existed, which is why the sudden crash in November shook up the cryptocurrency industry.
In November 2022, BlockFi made an announcement that it was limiting withdrawals from clients due to uncertainty regarding Alameda loan collateral and the source of their credit line regarding FTX. Officials with BlockFi also said they learned about FTX filing for bankruptcy that same day, and through Twitter instead of official channels. According to Bloomberg, most of BlockFi’s assets have yet to be moved.
BlockFi filed a motion in bankruptcy court to let customers have access to their wallet accounts. The company has also filed a similar motion with Bermuda’s Supreme Court regarding to BlockFi International accounts. Customers possessing BlockFi interest accounts do not possess access to these accounts.
BlockFi has plans to compensate creditors with stock, coins and cash. BlockFi has $256.9 million worth of liquidated assets which it has set aside in order to fund needed operations while it restructures.
Chapter 11 Bankruptcy And BlockFi
If you’re a customer of BlockFi, you probably have many questions, especially if you have suspended funds or outstanding loans. You may have never even heard of a Chapter 11 bankruptcy.
Chapter 11 bankruptcies are also known as reorganization bankruptcies. These bankruptcies let debtors become debtors in possession of assets and properties. They let debtors borrow new credit which is subject to a court’s approval, and utilize any assets they possess in order to pay off creditors. When BlockFi filed for bankruptcy voluntarily, they submitted a disclosure statement which contained info regarding its liabilities and assets allowing creditors to make an informed judgment regarding the company’s reorganization plan.
Under this type of bankruptcy, stockholders’ personal asset values won’t be at risk. Only the value of stockholders’ investment in BlockFi’s stock will be at risk since it may be influenced by external factors.
BlockFi, by filing this type of bankruptcy, may act as a trustee. The company must account for any property or object, examine creditors’ claims and file progress reports. The company will also be under administrative oversight of a United States Trustee who may question them about property, conduct and acts relating to their bankruptcy.
BlockFi would need to report monthly expenses and income, taxes, employee salaries and bank accounts they created. The United States Trustee may also form a Creditor’s Committee allowing creditors of the debtor to perform an investigation of the business operation and create a plan for reorganization to allow for proper business management.
Chapter 11 bankruptcies can take up to five years. This can be a long time for creditors and investors. It may be crucial for you to obtain the help of our experienced attorneys who can help protect your rights.
Call us today for a free consultation. Don’t wait, as time is limited to file a claim. You may be eligible for financial compensation.