Bankrupt crypto lender BlockFi expects to grant customer withdrawals this summer, following the successful completion of essential testing to verify accurate account balances. In an email sent to customers, it was revealed that BlockFi received court approval on May 17 to update user interfaces, which is a necessary step to facilitate clients’ fund withdrawals more easily. As Judge Michael Kaplan clarified in the May court order, the digital assets contained within the custodial omnibus wallets do not belong to BlockFi since the platform’s pause.
To process the withdrawals, BlockFi needs to build new product functionality and make changes to its platform. The anticipated completion of this work and necessary testing is set for this summer, with the firm aiming to start making distributions to clients at that time. BlockFi has yet to comment on the exact timeline.
The company also shared its plans for implementing batch withdrawals. Clients will be able to move their digital assets from BlockFi wallets to external wallets, but cash distributions will not be supported. It is expected that withdrawals will be allowed from BlockFi wallet accounts for assets not at risk of potential preference claims or demands made by specific creditors seeking repayment priority. The withdrawals will be processed in batches, with users receiving an email as soon as they become eligible to commence withdrawing their funds. In the meantime, users are encouraged to set up an external wallet, which will facilitate smooth withdrawal from BlockFi.
Back in November, BlockFi halted withdrawals just two days after assuring users of its full operational status. The company attributed this action to uncertainties arising from the downward spiral of Alameda Research and FTX, which had earlier agreed to extend a credit facility to the lender. This week, BlockFi was granted more time to devise a bankruptcy exit plan, with the deadline being pushed to July 6 due to a disagreement with the unsecured creditors committee.
Overall, the anticipated opening of customer withdrawals this summer brings hope to investors who have been waiting to regain access to their funds. The company’s planned approach of batch withdrawals aims to facilitate a seamless and organized distribution, while also potentially easing the concerns of the market and its user base.
Source: Blockworks
