BlockFi, the bankrupt cryptocurrency lender, has released a letter asking its creditors to disregard certain statements that were prematurely made earlier this month regarding the plan to reorganize. The letter was directed by the court. BlockFi has retracted the statements that were posted on its website, court docket, and Twitter, saying that they were made too soon. The “corrective letter to creditors” was released on Friday.
BlockFi’s Disclosure Statement not Yet Approved by Court
According to the letter, the court has not yet approved BlockFi’s disclosure statement or its ability to solicit acceptances of its plan. The BlockFi Official Committee of Unsecured Creditors disagreed with BlockFi’s plan to reorganize. The letter also noted that the Committee does not support the plan of reorganization in question. Among other issues, the Committee believes that the plan provides releases of litigation claims against current and former directors and officers of BlockFi who committed significant misconduct that harmed BlockFi and its customers.
Failed Negotiations with BlockFi
The committee stated that it tried to negotiate with BlockFi, but its efforts were in vain. In a tweet on May 16, the committee said, “We tried, really hard, to negotiate with BlockFi. Those efforts required keeping most of our investigation’s findings out of the public domain to create a ‘safe space’ to negotiate. BlockFi decided to cut off negotiations.”
BlockFi’s Bankruptcy and Customer Deposits
BlockFi filed for Chapter 11 bankruptcy in November after the fallout of failed crypto exchange FTX. The crypto lender paused withdrawals on Nov. 16 and said it had “significant exposure to FTX” and its affiliated companies. As of 2021, BlockFi had between $14 billion and $20 billion worth of customer deposits and had lent out $7.5 billion, according to previous cryptonews.com reporting.
BlockFi has taken back its plan to reorganize, calling it premature. The court has not yet approved the disclosure statement or BlockFi’s ability to solicit acceptances of its plan. The BlockFi Official Committee of Unsecured Creditors has disagreed with BlockFi’s plan for reorganization. The committee has also tried to negotiate with BlockFi, but its efforts were unsuccessful.