# BlockFi tells U.S. bankruptcy court it is ‘the antithesis of FTX’ Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-11-30 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: BlockFi FTX Bankruptcy Fallout: Customer Funds Return Meta Description: Learn how BlockFi is working to protect customer funds amidst FTX's bankruptcy, with mature leadership and secure protocols, according to Reuters. URL: https://financedigest.com/blockfi-tells-u-s-bankruptcy-court-it-is-the-antithesis-of-ftxhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-11-29t161300z1lynxmpeias0s3rtroptp4fintech-crypto-blockfi-bankruptcy-1736814795248-compressed.jpg) By Dietrich Knauth (Reuters) -BlockFi, the first direct casualty of crypto exchange FTX’s collapse, told a U.S. [bankruptcy judge](https://www.financedigest.com/ftx-u-s-judge-expresses-doubts-about-parallel-bahamian-bankruptcy.html "FTX U.S. judge expresses doubts about parallel Bahamian bankruptcy") on Tuesday that the U.S. cryptocurrency lender was “the antithesis of [FTX” and that it would seek to return customer](https://www.financedigest.com/bahamas-regulator-holds-ftx-assets-pending-delivery-to-customers-creditors.html "Bahamas regulator holds FTX assets pending delivery to customers, creditors") funds as quickly as possible. BlockFi filed for Chapter 11 protection on Monday, [citing FTX’s collapse and volatility in the crypto](https://www.financedigest.com/natwest-limits-customers-crypto-transfers-citing-scam-concerns.html "NatWest limits customers’ crypto transfers, citing scam concerns") markets. Earlier in November, BlockFi had paused withdrawals from its [platform amid](https://www.financedigest.com/meta-to-wind-down-nfts-on-platforms-amid-crypto-bust.html "Meta to wind down NFTs on platforms amid crypto bust") uncertainty about FTX’s stability. BlockFi attorney Joshua Sussberg went to great lengths to [distance BlockFi from FTX at the company’s](https://www.financedigest.com/companies-in-china-distance-themselves-from-taiwan-amid-pelosi-backlash.html "Companies in China distance themselves from Taiwan amid Pelosi backlash") first bankruptcy hearing in Trenton, New Jersey. While detailing the companies’ complex financial relationship, Sussberg emphasized BlockFi did not [face the myriad issues plaguing FTX](https://www.financedigest.com/wave-of-lawsuits-over-ftx-expected-but-investors-will-face-legal-hurdles.html "‘Wave’ of lawsuits over FTX expected, but investors will face legal hurdles"), which spectacularly imploded earlier this month, sparking fears of contagion across the industry. FTX’s bankruptcy filings have revealed missing assets and a complete failure of [corporate controls – whereas BlockFi had mature and consistent leadership](https://www.financedigest.com/corporate-leadership-understanding-your-own-bias.html "Corporate Leadership: Understanding Your Own Bias"), hired the right experts, and implemented the proper procedures and protocols, Sussberg said. BlockFi was “shocked and dismayed” to learn about FTX’s poor management, Sussberg told U.S. Bankruptcy Judge Michael Kaplan. While giving Kaplan an overview of BlockFi’s history, Sussberg described the multiple [ways in which the company](https://www.financedigest.com/uk-companies-are-failing-to-capitalise-on-innovation-but-successful-innovators-are-showing-the-way.html "UK Companies Are Failing to Capitalise on Innovation, But Successful Innovators Are Showing the Way") and FTX were entangled. BlockFi had loaned $680 million to FTX’s affiliated [hedge fund](https://www.financedigest.com/what-is-a-hedge-fund.html "What Is A Hedge Fund") Alameda Research as part of BlockFi’s broader lending business prior to the crypto crash in May. After that market turmoil prompted the collapse of BlockFi borrower Three Arrows Capital and significant customer withdrawals, BlockFi obtained a $400 million [credit facility](https://www.financedigest.com/telecoms-group-orange-signs-sustainability-linked-refinancing-of-6-billion-euros-syndicated-credit-facility.html "Telecoms group Orange signs sustainability-linked refinancing of 6 billion euros syndicated credit facility") from FTX in July to keep it afloat, which included an option for FTX to buy it at a future date. Sussberg said Alameda had not repaid its $680 million BlockFi loan and BlockFi owed [FTX $275 million from the July FTX bailout](https://www.financedigest.com/binance-plans-to-buy-rival-ftx-in-bailout-as-crypto-market-crumbles.html "Binance plans to buy rival FTX in bailout as crypto market crumbles"). BlockFi also used FTX’s platform to trade cryptocurrencies, and BlockFi had $355 [million in crypto](https://www.financedigest.com/exclusive-binance-moved-346-million-for-seized-crypto-exchange-bitzlato-data-show.html "Exclusive-Binance moved 6 million for seized crypto exchange Bitzlato, data show") locked up as a result of FTX’s bankruptcy. Sussberg said on Tuesday that BlockFi intends to seek a [court ruling](https://www.financedigest.com/slipping-over-mexico-border-migrants-get-the-jump-on-u-s-court-ruling.html "Slipping over Mexico border, migrants get the jump on U.S. court ruling") allowing customers in the BlockFi Wallet program to withdraw their funds during the [bankruptcy](https://www.financedigest.com/court-oks-mallinckrodt-restructuring-1-billion-cut-to-opioid-settlement.html) case if they wish. “If it’s in your wallet, it stays in your wallet,” Sussberg said. BlockFi’s Wallet program was [created in response](https://www.financedigest.com/creating-sustainable-value-through-responsible-investment.html "Creating sustainable value through responsible investment") to regulatory investigations into the company’s interest-bearing accounts, which the U.S. Securities and [Exchange](https://www.financedigest.com/vaultbank-exchange-launches-in-beta-opening-security-tokens-for-trading.html "Vaultbank Exchange Launches in Beta, Opening Security Tokens for Trading") Commission had determined were unregistered securities offerings. To resolve those investigations, BlockFi stopped [offering interest-bearing accounts](https://www.financedigest.com/community-fintech-11onze-to-launch-el-canut-a-super-app-offering-universal-banking-accounts-and-digital-debit-cards.html "Community fintech 11Onze to launch – EL CANUT – a super APP offering universal banking accounts and digital debit cards") to U.S. customers, created the [Wallet](https://www.financedigest.com/understanding-cryptocurrency-wallets-securing-your-digital-assets.html) program for new U.S. customers and agreed to [pay a record $100 million](https://www.financedigest.com/sainsburys-pays-524-million-for-full-ownership-of-store-investment-vehicles.html "Sainsbury’s pays 4 million for full ownership of store investment vehicles") fine. During Tuesday’s hearing, Kaplan authorized BlockFi to continue paying employees, maintain [bank accounts](https://www.financedigest.com/new-legislation-makes-switching-bank-accounts-simples.html "New legislation makes switching bank accounts “simples”") and take other measures needed to continue its day-to-day operations during its bankruptcy case. Kaplan also allowed BlockFi to remove customer names and email addresses from court documents for now, [saying he did not have enough information to make a final ruling](https://www.financedigest.com/crypto-firms-will-develop-offshore-without-clear-us-rules-coinbase-chief-says.html "Crypto firms will develop ‘offshore’ without clear US rules, Coinbase chief says") on whether the names should be published. Kaplan will make a final ruling at a later date, after weighing privacy concerns against the [bankruptcy court’s](https://www.financedigest.com/cineworld-gets-us-court-approval-to-raise-2-26-billion-after-bankruptcy.html "Cineworld gets US court approval to raise .26 billion after bankruptcy") transparency requirements. In a [court filing on Monday](https://www.financedigest.com/ukraine-to-confront-russia-at-intl-court-of-justice-on-monday.html "Ukraine to confront Russia at Int’l Court of Justice on Monday"), BlockFi said it owes money to more than 100,000 creditors. BlockFi listed its [assets and liabilities as between $1 billion](https://www.financedigest.com/french-asset-manager-amundi-posts-q3-outflows-of-13-billion.html "French asset manager Amundi posts Q3 outflows of billion") and $10 billion. The [company sold a portion of its crypto assets](https://www.financedigest.com/why-it-pays-for-companies-to-hold-physical-assets-in-separate-limited-companies.html "Why it pays for companies to hold physical assets in separate limited companies") earlier in November to fund its bankruptcy, and it entered bankruptcy with $256.5 million in cash on hand. BlockFi has proposed an initial [restructuring plan](https://www.financedigest.com/sri-lanka-to-unveil-debt-restructuring-plan-to-creditors.html "Sri Lanka to unveil debt restructuring plan to creditors") that offers two paths out of bankruptcy. Sussberg acknowledged on Tuesday that the plan has “many blanks,” but said it demonstrates BlockFi’s commitment to moving quickly. We want to [move as fast as we can to give value back](https://www.financedigest.com/analysis-at-world-cup-saudi-crown-prince-moves-back-on-to-global-stage.html "Analysis-At World Cup, Saudi crown prince moves back on to global stage") to our clients,” Sussberg said. Its Chapter 11 plan envisages that BlockFi Wallet [customers would be paid back in full and other account holders and creditors would receive a mixture of cryptocurrency](https://www.financedigest.com/britains-nationwide-curbs-cryptocurrency-purchases-by-customers.html "Britain’s Nationwide curbs cryptocurrency purchases by customers"), cash, and new equity shares. The plan also [includes an option for a sale](https://www.financedigest.com/stanchart-weighing-options-including-sale-of-aircraft-lessor-unit.html "StanChart weighing options, including sale, of aircraft lessor unit") of the company. (Reporting by Dietrich Knauth in New York and Noor Zainab Hussain in BengaluruEditing by Alexia Garamfalvi, Anna Driver and Matthew Lewis) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---