BlockFi Management Hasn't Withdrawn any Crypto Since October, Lawyers Tell Court
Executives of bankrupt crypto lender BlockFi have not withdrawn any of their own cryptocurrencies locked up in the platform since October, a lawyer for the company told a New Jersey court on Monday, contrasting it to fellow bankrupt crypto lender Celsius.
BlockFi filed for bankruptcy in late November 2022 shortly after the stunning 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, partner at law firm Kirkland & Ellis and representative for BlockFi said during the second hearing in its Chapter 11 bankruptcy proceedings. Kirkland & Ellis also represents Celsius in its own bankruptcy proceeding.
Sussberg said the company plans to file its assets and liabilities, along with a statement of financial affairs (SOFA) on Jan. 11, which the BlockFi later confirmed via its Twitter account. Shortly after the first hearing in November last year, the company also 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 also 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 some $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, 2022 and no member made a withdrawal greater than 0.2 bitcoin (BTC) in value at anytime after Aug. 17, 2022, Sussberg said during the hearing.
Presiding Judge Michael B. Kaplan also denied a motion by BlockFi, requesting the turnover of Robinhood shares 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.