Crucial BlockFi Bankruptcy Lawsuit Dismissed: DOJ Settlement Reached

Major news for those following the complex BlockFi bankruptcy proceedings: a significant hurdle has been cleared. The administrator overseeing the crypto lender’s wind-down and the U.S. Department of Justice (DOJ) have successfully reached an agreement to dismiss a $35 million crypto lawsuit. This crucial development marks another step forward in resolving BlockFi’s financial affairs.
Details of the Crypto Lawsuit Emerge
The lawsuit, originally filed in May 2023, involved a demand from the DOJ to transfer over $35 million in crypto assets held in BlockFi accounts. The government asserted it had warrants to seize these funds from two Estonian citizens implicated in a separate criminal fraud case, unrelated to BlockFi’s own financial troubles. The dispute arose during BlockFi’s bankruptcy proceedings, with the DOJ initially arguing that the bankruptcy court lacked jurisdiction to prevent the asset transfer. Resolving this crypto lawsuit was important for clarifying the path forward for these specific funds.
DOJ Settlement Terms Finalized
According to court filings, the agreement to dismiss the case was formally approved by Judge Michael B. Kaplan of the US Bankruptcy Court for the District of New Jersey. Under the terms of this DOJ settlement:
- The case is dismissed with prejudice, meaning it cannot be refiled in the future.
- Each party (BlockFi’s estate and the DOJ) will bear its own legal fees and costs.
Mohsin Meghji, the Plan Administrator for BlockFi’s wind-down estates, represented BlockFi, while senior trial counsel Seth B. Shapiro led the representation for the Department of Justice. This resolution simplifies the legal landscape surrounding the BlockFi bankruptcy.
BlockFi Bankruptcy Wind-Down Continues
This settlement is part of the larger, ongoing effort to wind down BlockFi’s operations and return funds to creditors. BlockFi declared bankruptcy in November 2022 following the collapse of FTX. The company has been working through a complex process to settle claims and facilitate crypto asset recovery for its users.
Key aspects of the wind-down include:
- Partnering with Coinbase to allow eligible clients (including those with BlockFi Interest Accounts and retail loans) to withdraw remaining funds.
- Setting specific withdrawal deadlines for customers to reclaim assets (the latest was April 28, 2024).
- Reaching other significant settlements, such as the $875 million agreement with the FTX and Alameda Research estates in March 2023.
The bankruptcy court approved BlockFi’s Chapter 11 plan in September 2023, aiming to repay over 10,000 creditors. While the total claims against BlockFi are substantial, exceeding $10 billion owed to over 100,000 creditors, including major debts to entities like Three Arrows Capital, incremental resolutions like this DOJ settlement are vital steps in the complex distribution process.
Staying Informed on BlockFi News
For former BlockFi clients and interested parties, keeping up with BlockFi news is essential. Each legal and administrative step, including this recent DOJ settlement regarding the crypto lawsuit, contributes to the overall timeline and potential outcome for creditors seeking crypto asset recovery. While the bankruptcy process is lengthy and challenging, these resolutions provide clarity and move the wind-down phase forward.
In summary, the dismissal of the $35 million lawsuit between the BlockFi bankruptcy administrator and the DOJ is a positive development, resolving a specific legal claim and allowing the focus to remain on the broader efforts to return funds to creditors and conclude the BlockFi bankruptcy proceedings.