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BlockFi is not a traditional cryptocurrency exchange. Rather it is a platform that works similar to a bank that offers you loan facilities and interests on your crypto holdings.

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BlockFi, the crypto lending platform that faced liquidity issues in mid-2022, has officially emerged from bankruptcy, as announced in a blog post on October 24. According to the post, withdrawals are now available to nearly all Wallet customers. The platform has initiated the process for BlockFi Interest Account (BIA) and Loan customers to withdraw some assets, with the first distributions expected in early 2024.

With its emergence from bankruptcy, BlockFi is set to implement its recovery plan, allowing it to repay creditors and distribute assets to customers. Furthermore, the platform plans to pursue the recovery of assets from other firms, including bankrupt crypto platforms such as Three Arrows Capital (3AC) and FTX. Success in this litigation is anticipated to enhance client recoveries, and BlockFi aims to continue distributing assets and processing claims.

BlockFi's Bankruptcy Journey and Current Status

Background and Liquidity Issues:

BlockFi encountered liquidity problems in mid-2022 when the Terra stablecoin collapsed. To rescue the platform, FTX provided a $400 million credit line. However, FTX subsequently went bankrupt in November, leading to BlockFi's downfall. A U.S. court, on August 17, approved a plan for BlockFi to wind down operations and repay U.S.-based Wallet customers. Initially, the court did not allow U.S. customers to withdraw, but the recent update permits international users to do so.

BlockFi's Bankruptcy Filings:

BlockFi filed for bankruptcy in November 2022, attributing its collapse to issues with the FTX empire and loans to FTX's sister firm Alameda. The bankruptcy claim suggested owing $275 million to FTX, but later developments indicated $1.2 billion in assets and loans with FTX and Alameda. The company's CEO, Zac Prince, testified about the mutual lending arrangement during the criminal case of former FTX CEO Sam Bankman-Fried.

BlockFi's Post-Bankruptcy Operations and Future Plans

BlockFi has opened a withdrawal window for wallet customers until December 31, allowing them to request withdrawals. Additionally, it intends to start distributing assets to BIA and Retail Loan customers in early 2024. The company emphasizes a claims reconciliation process to ensure accurate reflections of client claims, both in asset class and amount, for fair and equitable distributions of remaining and recovered assets.

Pursuing Debts and Litigation:

BlockFi is set to recover assets from firms like FTX and Three Arrows Capital. The success of litigation against these companies is crucial for enhancing payouts to claimants. Despite some parties contesting BlockFi's claims, the company remains focused on executing its recovery plan.