BlockFi partners with Coinbase for fund distribution amid shutdown

Avatar

Struggling crypto lender BlockFi is winding down operations and has revealed its intention to shut down its web platform by May 2024. To assist clients with fund withdrawals, BlockFi will partner with Coinbase, a major cryptocurrency exchange, for fund distribution.

In a blog post, the company based in New Jersey stated that its collaboration with Coinbase will enable eligible BlockFi Interest Accounts (BIA), Retail Loans, and Private Clients to withdraw their cryptocurrency holdings.

In November 2022, BlockFi declared bankruptcy following FTX’s collapse and in 2023, BlockFi announced its closure and outlined plans to return customers’ crypto holdings, with a withdrawal request deadline set for April 28, 2024.

The lender informed clients on Thursday that as the deadline to withdraw digital assets from the current estate distribution has passed, they will receive instructions on setting up a Coinbase account to facilitate withdrawals, whether using an existing or new approved Coinbase account.

Source: BlockFi

The company is providing an additional opportunity for those who missed the withdrawal deadline and the May 10 deadline for verification via the BlockFi platform. Clients who do not establish an approved Coinbase account may have their assets liquidated into cash and distributed accordingly.

The plan administrator will continue to use Coinbase for upcoming distribution rounds, potentially involving recovered funds from FTX. Without this capability, cash would be the only option for subsequent distributions.

BlockFi stated that it does not intend to partner with any other providers for cryptocurrency distributions. Therefore, investors are advised to stay cautious to avoid potential scams from third-party entities.

Related: FTX victims describe ‘irreparable harm’ ahead of Sam Bankman-Fried’s sentencing

BlockFi has faced fraudulent activity in the past, with individuals receiving deceptive emails that mimicked legitimate communications, falsely claiming immediate withdrawals of their remaining balances.

Significantly, BlockFi had reached an $875 million in-principle settlement with the estates of FTX and Alameda Research. The settlement resolved BlockFi’s claims against FTX, totaling approximately a billion dollars, and also saw FTX waive “millions of dollars of avoidance claims and other counterclaims” against BlockFi.

BlockFi’s CEO Zac Prince, who testified as a government witness in Bankman-Fried’s criminal trial, asserts that the actions of the FTX founder directly led to BlockFi’s bankruptcy.

In September 2023, the bankruptcy court approved BlockFi’s Chapter 11 plan to repay its 10,000 creditors. Estimates show BlockFi owes up to $10 billion to over 100,000 creditors, including $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund Three Arrows Capital.

Magazine: What do crypto exchanges really do with your money?