Reading 2 minutes Published Updated
Disgruntled creditors of bankrupt cryptocurrency lending company BlockFi have filed a new lawsuit in response to the company’s latest restructuring plan.
On May 12, BlockFi laid out its plan for the reorganization in Chapter 11 while filing with the United States Bankruptcy Court in Trenton, New Jersey. The firm said the sale of BlockFi may not generate enough profit for lenders as it owes almost $1.3 billion to its top 50 lenders.
In response, BlockFi’s creditors filed another lawsuit on May 15, alleging that BlockFi deliberately took steps to drag out the lawsuit.
Represented by law firm Brown Rudnick, BlockFi’s lenders wrote that BlockFi sold about $240 million worth of cryptocurrencies before filing for bankruptcy at the end of November 2022. The lenders stressed that the cryptocurrency lender sold the assets “at the lowest level,” referring to the huge market downturn following the FTX crash.
“The liquidation of almost all domestic cryptocurrencies in November 2022 was a very bad decision,” the lenders said, claiming that the decision cost more than $100 million over the following months. Lenders also cited “unnecessary and unwanted tax implications,” also noting that the amount of the sale had nothing to do with its bankruptcy. The application says:
“The sale of $240 million in crypto has never been rationally tied to bankruptcy funding needs, given that no reasonable estimate would tie the costs of this bankruptcy to $240 million.”
BlockFi customers said the company spent $22.5 million to buy a $30 million insurance policy. According to creditors, this happened shortly after BlockFi sold the digital assets, but before filing for bankruptcy.
Related: SEC Revises $22M Fine Against LBRY, Seeks $111K Instead
“By selling everything ahead of the petition, BlockFi has given itself a near limitless budget, virtually immune to adversarial bankruptcy proceedings, to run its business for as long and as contentious as it sees fit, without the “typical milestones” in DIP or cash collateral order,” the creditors wrote.
The plaintiffs urged the court to close the case as soon as possible, transferring the property “into the hands of the new management.” Creditors again noted that such a scenario is not in line with the debtors’ agenda.
BlockFi did not immediately respond to Cointelegraph’s request for comment. This article will be updated pending new comments.