The bankrupt cryptocurrency lending company BlockFi plans to sell $160 million in loans backed by some 68,000 bitcoin mining machines as part of its bankruptcy proceedings.
In a Bloomberg report on January 24, two people “familiar with the matter” said BlockFi began the process of selling the loans last year.
The cryptocurrency lender filed for Chapter 11 bankruptcy in November, citing its significant exposure to the now-defunct cryptocurrency exchange FTX as the reason for its collapse.
Nevertheless, some of these loans have since defaulted and could be under-secured given the falling price of bitcoin mining equipment, according to the sources, adding that the last day for bidders to submit offers for the loans is January 24.
In comments to Cointelegraph, crypto lawyer Harrison Dell – director of Australian law firm Cadena Legal – explained that if the bitcoin mining equipment used as collateral is worth less than the value of the loans, the loans are “no longer worth their paper value to BlockFi.”
Dell said that the people bidding on the debts are probably debt collection companies buying for “pennies on the dollar.”
He added that the debt sale is probably “all the managers” of BlockFi can salvage for these assets.
Dell also suggested that this is just the beginning of what’s to come for the cryptocurrency industry. He pointed:
“This is just the beginning of the asset sales of BlockFi and other cryptocurrency firms that have filed for Chapter 11 bankruptcy in the United States.”
Cointelegraph has reached out to BlockFi for comment on the situation, but has not heard back by press time.
BlockFi’s attempt to pay off your loans is likely part of its efforts to pay off its creditors, that according to his
bankruptcy filing in November, number more than 100,000.
At the time of its bankruptcy, BlockFi was reported to have sold $239 million of its own cryptocurrency assets to cover bankruptcy expenses. and warned about 70% of its staff that they would lose their jobs.
Earlier this week, BlockFi asked the court in a January 23 filing to release funds to allow bonuses to key employees in an attempt to retain them amid Chapter 11 bankruptcy proceedings.
Megan Crowell, BlockFi’s chief of staff, testified in court that without financial incentives the company is unlikely to be able to retain its employees.
Crowell said that many employees are likely to leave the company without competitive compensation, noting that it would add more financial impact to the company in the future.
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