BlockFi bankruptcy administrator and DOJ agree to dismiss $35M lawsuit

The head overseeing BlockFi’s bankruptcy wind-down and the US Department of Justice (DOJ) person reached a colony to disregard a $35 cardinal crypto plus transportation suit involving the crypto lender.

The statement was approved by Judge Michael B. Kaplan of the US Bankruptcy Court for the District of New Jersey connected Friday, according to tribunal filings.

The lawsuit, filed successful May 2023, sought to transportation implicit $35 cardinal successful crypto assets from BlockFi to the US government. The DOJ said it had warrants to prehend the funds from the BlockFi accounts of 2 Estonian citizens successful a transgression fraud lawsuit unrelated to BlockFi’s bankruptcy.

At the time, the DOJ argued that the US Bankruptcy Court for the District of New Jersey did not person the jurisdiction to forestall BlockFi from transferring the assets. The quality arose during BlockFi's bankruptcy proceedings.

A snippet of the lawsuit. Source: Bloomberg Law

Related: California revokes BlockFi’s lending licence 2 years aft bankruptcy

Case dismissed with prejudice

Under the stipulation agreed upon by some parties, the lawsuit was dismissed with prejudice, meaning it cannot beryllium refiled. Each enactment volition carnivore its ain ineligible fees and costs arsenic portion of the settlement.

Mohsin Meghji, Plan Administrator for BlockFi’s wind-down estates, represented the crypto steadfast successful the case. The Department of Justice was represented by elder proceedings counsel Seth B. Shapiro and his squad from the Civil Division’s Commercial Litigation Branch.

In May past year, BlockFi announced plans to unopen down its web platform portion partnering with Coinbase to assistance clients retreat their remaining funds. Eligible users, including those with BlockFi Interest Accounts, retail loans, and backstage lawsuit accounts, tin usage Coinbase for withdrawals.

The institution declared bankruptcy successful November 2022 pursuing the illness of FTX and subsequently set a withdrawal deadline of April 28, 2024, for customers to reclaim their crypto holdings.

Related: BlockFi and 3AC colony woody gets judge’s go-ahead but remains sealed

BlockFi reaches colony with FTX

In March past year, BlockFi besides reached an $875 cardinal settlement with FTX and Alameda Research estates, resolving astir $1 cardinal successful claims. CEO Zac Prince testified that FTX laminitis Sam Bankman-Fried’s actions straight caused BlockFi’s bankruptcy.

The bankruptcy tribunal approved BlockFi’s Chapter 11 program successful September 2023 to repay implicit 10,000 creditors. BlockFi owes astir $10 billion to much than 100,000 creditors, including large debts to its apical 3 creditors and the bankrupt hedge money Three Arrows Capital.

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