BlockFi files motion to return frozen crypto to wallet users

Published at: Dec. 20, 2022

Bankrupt crypto lending platform BlockFi has filed a motion requesting authority from the United States Bankruptcy Court to allow its users to withdraw digital assets currently locked up in BlockFi Wallets.

In a motion filed on Dec .19 with the U.S. Bankruptcy Court in the District of New Jersey, the lender asked the court for authority to honor client withdrawals from wallet accounts as of the platform’s pause on Nov. 10.

As part of our presentation in Court, we also expressed our intention to request approval from the Court to restore withdrawal activities for BlockFi Wallet accounts.

— BlockFi (@BlockFi) November 29, 2022

The court documents also request permission to update the user interface to properly reflect transactions as of the platform’s pause.

In a widely shared email sent to affected users, BlockFi called the motion an “important step toward our goal of returning assets to clients through our chapter 11 cases," adding

“It is our belief that clients unambiguously own the digital assets in their BlockFi Wallet Accounts.”

According to BlockFi, this motion will not impact withdrawals or transfers from BlockFi Interest Accounts, which remain paused at this time.

The lending platform has also signaled intentions to seek “similar relief from the Supreme Court of Bermuda with respect to BlockFi Wallet Accounts held at BlockFi International Ltd.”

BlockFi International is a subsidiary of the company based in Bermuda which runs its non-U.S. operations.

Crypto blogger Tiffany Fong shared the communication sent to her by BlockFi on Dec. 19, commenting that the embattled firm appears to be moving much faster than Celsius, which filed for bankruptcy over five months ago in July as opposed to BlockFi's bankruptcy filing in November.

WOW, @BlockFi has already filed a motion requesting client withdrawals for assets held in BlockFi Wallet Accounts. S/O to BlockFi for moving exponentially more quickly than @CelsiusNetwork in Ch 11. pic.twitter.com/JvtWzMklNA

— Tiffany Fong (@TiffanyFong_) December 20, 2022

According to the court documents, a hearing to decide if the motion will be granted is scheduled for Jan. 9, 2023.

While a separate hearing regarding wallet accounts held at BlockFi International Ltd is scheduled to go before the Supreme Court of Bermuda on Jan. 13, 2023.

BlockFi halted client withdrawals and requested clients not to deposit to BlockFi wallets or Interest Accounts on Nov. 11, citing a lack of clarity around FTX.

By Nov. 28, BlockFi filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey for the company and its eight subsidiaries. BlockFi International filed for bankruptcy with the Supreme Court of Bermuda on the same day.