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BlockFi Management Hasn't Withdrawn Any Crypto Since October, Lawyer Tells Court

Sandali Handagama
Updated ·2-min read

Executives of bankrupt crypto lender BlockFi haven't withdrawn any of their own cryptocurrencies locked up in the platform since October, a lawyer for the company told a U.S. Bankruptcy Court for the District of New Jersey on Monday, contrasting it to fellow bankrupt crypto lender Celsius Network.

BlockFi filed for bankruptcy in November shortly after the collapse of crypto exchange FTX.

"I think the important takeaway here is that there was no situation where insiders were pulling money off the platform on the eve of or anywhere near this bankruptcy file ... So this is not the Celsius case where management extracted value on the eve of the file," Joshua Sussberg, a partner at law firm Kirkland & Ellis and representative for BlockFi, said during the second hearing in BlockFi's Chapter 11 bankruptcy proceedings. Kirkland & Ellis also represents Celsius in that firm's bankruptcy.

Sussberg said BlockFi plans to file its assets and liabilities, along with a statement of financial affairs on Wednesday, which BlockFi later confirmed on Twitter. Shortly after the first hearing in November, the company kicked off a sale process and has reached out to "106 domestic and international potential buyers for some or all of the business," Sussberg's presentation said. The company plans to ask for court approval of bidding procedures at a Jan. 30 hearing.

Sussberg also pointed to around $15 million in withdrawals by five members of the management team, including $6 million by CEO Zac Prince, that were categorized as "litigation settlement payment" or tax payments routed through executives.

No member of the BlockFi management team withdrew any cryptocurrency from the platform after Oct. 14, and no member made a withdrawal greater than 0.2 bitcoin (BTC) in value after Aug. 17, Sussberg said during the hearing.

U.S. Bankruptcy Judge Michael B. Kaplan also denied a motion by BlockFi, requesting the turnover of Robinhood Markets (HOOD) shares that FTX had pledged to BlockFi as collateral for a loan.

“At this juncture, it's clear that this court is not in a position to enter any turnover order of any type. The shares are being held by the government pursuant to a warrant of seizure, and the government is not a party to the pending adversary proceeding,” Kaplan said during the hearing before denying the motion.

Read more: Bankrupt Crypto Lender BlockFi Looks to Restart Certain Customer Withdrawals