BlockFi and DOJ Strike Deal: $35 Million Lawsuit Nears Resolution – Key Insights
BlockFi's administrator and the Department of Justice have reached a tentative agreement to settle a high-stakes $35 million legal battle. Here's what you need to know.
Behind the scenes: The crypto lender's restructuring team and federal prosecutors finally found common ground after months of wrangling—proving even bankruptcy can have happy endings (for lawyers).
The settlement terms remain under wraps, but industry watchers speculate this could set precedent for other crypto insolvencies. One thing's certain: someone's getting paid—just probably not the creditors.
BlockFi Vs DOJ: Peace At Last
In May 2023, the DOJ sought to effect a transfer of $35 million worth of assets in BlockFi accounts to the US government. Notably, DOJ representatives claimed these funds belonged to two Estonian nationals involved in a fraud case and had obtained legal warrants to assert ownership of these illicit proceeds.
However, BlockFi is currently undergoing a bankruptcy process following the monumental collapse of $32 billion crypto exchange FTX in November 2022. The crypto lending firm famously filed for Chapter 11 bankruptcy some days after this seismic event due to its level of financial exposure to FTX, valued at $1.03 billion in unpaid loans.
Therefore, a group of unsecured creditors issued a lawsuit against the DOJ claiming that such transfers could impact potential asset recoveries. Meanwhile, the DOJ argued that the US Bankruptcy Court for the District of New Jersey – at which the case had been filed – could not neutralize the government’s claims to these assets.
Two years following this lawsuit, Meghi and the DOJ have agreed to terminate all legal proceedings around the proposed $35 million asset transfer.
The joint resolution was brought before Judge Michael B. Kaplan of the US Bankruptcy Court for the District of New Jersey on Friday, July 11, who approved the case on the day. Notably, both parties agreed to dismiss the case with prejudice, meaning it cannot be refiled. Meanwhile, each party is expected to bear its own legal fees and costs.
Following its bankruptcy filing in 2022, BlockFi reportedly owed 100,000 creditors an estimated $10 billion, including major debts to prominent names such as Ankura Trust, the US Securities and Exchange Commission, and defunct hedge fund Three Arrows.
Crypto Market Overview
In other news, the total crypto market is valued at $3.64 trillion following a 0.17% gain in the past day. Bitcoin, the maiden cryptocurrency, retains an unrivalled 63.9% market dominance, boasting of total market share valued at $2.33 trillion.
Interestingly, the crypto market enters a crucial week as the US House of Representatives is expected to debate three important legislations – the CLARITY Act, the Anti-CBDC Surveillance State Act, and the Senate’s GENIUS Act, as part of efforts to establish a credible regulatory framework that encourages digital asset adoptions and protect user interest.
