For months now, BlockFi has been mired in languishing bankruptcy proceedings that have been mired with controversy. Today, the former lending platform has announced a step forward in the process, noting that it is officially opening withdrawals for a subset of its users.
BlockFi was once a market leader among lending platforms, only to fail spectacularly due to poor risk-management practices, and exposure to the collapse of FTX, among other things.
Who is Eligible?
As it stands, BlockFi has a shortage of funds – meaning its liabilities outweigh the assets it controls. As a result, many of its users can expect to only receive a small portion of any funds locked on the platform. This applies mainly to those with funds in an interest-bearing account, as such clients are viewed as having ceded control of said assets.
However, those with funds locked in a wallet account are being viewed differently by the court presiding over this bankruptcy case. These individuals are being viewed as maintaining full ownership of their funds, and as of today are being granted permission to begin withdrawals. There are multiple caveats that clients should be aware of, such as the following.
- Only applicable to U.S. clients
- Did not withdraw or transfer more than $7,575 worth of digital assets from their BlockFi Interest Account (BIA) or BlockFi Private Client (BPC) on or after November 2, 2022.
- Did not hold any trade-only assets in their Wallet at the time of Platform Pause on November 10, 2022, at 8:15 P.M. E.T.
While international clients of BlockFi are not currently eligible for withdrawals of any kind, the company has noted that it is “…working with the Joint Provisional Liquidators to begin opening withdrawals for BlockFi International clients”, and expects this to occur in the coming weeks.
Despite clearly listed parameters for eligibility, there have already been various BlockFi users having issues with this withdrawal process. Various, which received emails stating they ‘have been identified as an eligible client to begin withdrawing digital asset', have attempted to complete the process only to then be greeted with a statement indicating otherwise.
While the digital asset sector has clearly exited its most recent crypto-winter, there is still a crop of companies dealing with the fallout. For the most part, these are a crop of lending platforms that include not only BlockFi, but Celsius, Voyager, Vauld, and more.
Interestingly, despite the collapse of so many like-minding lending platforms – or perhaps due to it – there are still options like Ledn.io that continue to operate as usual, capitalizing on a now much less competitive field.
Moving forward, it should be interesting to see if new practices are adopted, mitigating counterparty risks that have come back to bite so many people over the past year, or if such platforms fade in to non-existence.