BlockFi Inc. has filed a petition with a U.S. court to allow some clients to withdraw cryptocurrencies from their locked BlockFi digital wallets, calling the move an “important step” in its bankruptcy proceedings, according to a Tuesday press release.
The company said a similar request has been made to the Supreme Court of Bermuda by BlockFi International Ltd, the firm’s non-U.S. counterpart.
BlockFi froze customer withdrawals on Nov. 10 and two weeks later filed for Chapter 11 bankruptcy protection along with eight other affiliates. In its initial bankruptcy filing, BlockFi stated it has assets between US$1 billion and US$10 billion, with liabilities in the same range, along with over 100,000 creditors.
The company attributed its difficulties to “significant exposure” to Sam Bankman-Fried’s cryptocurrency exchange FTX, which filed for bankruptcy protection on Nov. 11. FTX trapped the funds of an estimated 1 million creditors when it collapsed.
In June, Bankman-Fried and FTX had agreed to help bail out BlockFi with a US$250 million revolving credit facility amid a market slump caused by the US$40 billion Terra-Luna stablecoin collapse.
The company said the request to unfreeze assets does not include customers with funds stuck in BlockFi’s crypto interest-bearing accounts, which will remain paused.
On the day of its bankruptcy, BlockFi filed a lawsuit against a Bankman-Fried-owned holding company Emergent Fidelity Technologies. BlockFi is seeking assets that Emergent Fidelity Technologies had allegedly pledged to the exchange as collateral for a loan in November.
The assets could presumably aid in BlockFi’s goal to return funds to their customers.
BlockFi’s Tuesday motion to return assets to its customers will be decided by the bankruptcy court on Jan. 9, with a similar hearing held on Jan. 13 for its international arm.
