On April 19, a New Jersey (United States) bankruptcy judge granted BlockFi, a digital asset lender, additional time to file a bankruptcy exit plan.
The cryptocurrency lender filed for bankruptcy in November 2022 and has reportedly been granted a 48-day extension, until May 15, to file an exit plan. The cryptocurrency firm is exploring a potential sale of company assets or the possibility of enlisting an outside sponsor to support a restructuring deal, BlockFi attorney Joshua Sussberg said in a hearing on Wednesday.
Under the bankruptcy code, debtors are expected to propose a Chapter 11 plan within the first 120 days of filing. Thus, BlockFi had to present a plan before March 27. However, on March 21, the company filed a request to extend the 90-day deadline for its Chapter 11 plan, until June 26.
BlockFi’s lawyers said in defense of the deadline extension request that “much work remains to be done” due to the scale and complexity of Chapter 11 cases. The company is estimated to owe up to $10 billion to more than 100,000 creditors. Apparently, Judge Michael Kaplan, the bankruptcy judge handling the case, considered that it was worth extending the deadline to ensure the smooth running of the case.
A committee of BlockFi clients argued that they should be allowed to take control of the bankruptcy case so that cryptocurrency held on the platform can be returned to creditors immediately.. The committee’s attorney, Robert Stark, told Kaplan that BlockFi’s creditors are not sophisticated lenders, but rather individual retail clients, “many of whom have lost their life savings,” according to reports.
Stark claimed that BlockFi lacks a viable business for the reorganization and is likely to sell its platform, which he referred to as a “bundle of sticks.” Although Kaplan rejected the committee’s appeal, he opted to grant a shorter extension of time than BlockFi requested.
According to Sussberg, the length of the extension was “modest”, saying the company would have a plan ready for unsecured creditors to evaluate within two weeks.
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