BlockFi’s bankruptcy administrator and the U.S. Department of Justice (DOJ) have agreed to end a $35 million lawsuit about crypto assets. A judge in New Jersey approved the deal on Friday, helping BlockFi move forward with its bankruptcy process.
The lawsuit was filed in May 2023 when the DOJ wanted to make a $35 million crypto asset transfer from two accounts on BlockFi. These accounts were connected to two people from Estonia who were involved in a fraud case, which is unrelated to BlockFi’s bankruptcy filing.
At the time, the DOJ had stated that the US Bankruptcy Court for the District of New Jersey did not have the right to stop the asset transfer. The legal battle that ensued coincided with BlockFi’s bankruptcy filing.
This settlement has ended the case for good, and both sides will pay their legal costs. BlockFi was represented by its bankruptcy plan administrator, Mohsin Meghji, while senior trial counsel Seth B. Shapiro and the Department of Justice’s legal team represented the government.
Their agreement enables BlockFi to concentrate on paying back its creditors. After the destruction of one of its largest creditors, FTX, the firm went bankrupt in the year 2022. It has a debt of $10 billion to over 100,000 creditors, including big debts to its top three creditors and a hedge fund called Three Arrows Capital.
In March 2023, BlockFi reached an $875 million deal with FTX and Alameda Research, settling $1 billion in claims. BlockFi’s CEO, Zac Prince, said FTX’s actions caused BlockFi’s financial troubles.
In May 2023, BlockFi said it would close its website and teamed up with Coinbase to let clients, including those with interest accounts, loans, or private accounts, withdraw their money by April 28, 2024. In September 2023, a court approved BlockFi’s plan to repay its creditors.
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