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The supervisor managing BlockFi’s bankruptcy resolution and the US Department of Justice (DOJ) have come to an agreement to drop a $35 million cryptocurrency asset transfer lawsuit involving the crypto lender.
The settlement was endorsed by Judge Michael B. Kaplan of the US Bankruptcy Court for the District of New Jersey on Friday, as per court documents.
The litigation, initiated in May 2023, aimed to transfer over $35 million in crypto assets from BlockFi to the US government. The DOJ asserted it had warrants to confiscate the funds from the BlockFi accounts of two Estonian nationals in a criminal fraud matter not linked to BlockFi’s bankruptcy.
At that moment, the DOJ contended that the US Bankruptcy Court for the District of New Jersey lacked the authority to stop BlockFi from transferring the assets. The conflict emerged during BlockFi’s bankruptcy proceedings.
Related: California rescinds BlockFi’s lending license 2 years post-bankruptcy
Case dismissed with finality
According to the stipulation agreed upon by both parties, the case was dismissed with finality, meaning it cannot be refiled. Each party will incur its own legal expenses and costs as part of the settlement.
Mohsin Meghji, Plan Administrator for BlockFi’s winding down estates, represented the crypto company in the matter. The Department of Justice was represented by senior trial counsel Seth B. Shapiro and his team from the Civil Division’s Commercial Litigation Branch.
In May of the previous year, BlockFi revealed intentions to close its web platform while collaborating with Coinbase to facilitate client withdrawals of their remaining funds. Eligible users, including those with BlockFi Interest Accounts, retail loans, and private client accounts, can utilize Coinbase for withdrawals.
The firm filed for bankruptcy in November 2022 following the downfall of FTX and subsequently set a withdrawal deadline of April 28, 2024, for clients to recover their crypto assets.
Related: BlockFi and 3AC settlement agreement receives judge’s approval but remains sealed
BlockFi reaches accord with FTX
In March of the previous year, BlockFi also secured an $875 million settlement with FTX and Alameda Research estates, addressing approximately $1 billion in claims. CEO Zac Prince testified that the conduct of FTX founder Sam Bankman-Fried directly led to BlockFi’s bankruptcy.
The bankruptcy court sanctioned BlockFi’s Chapter 11 plan in September 2023 to reimburse over 10,000 creditors. BlockFi owes around $10 billion to more than 100,000 creditors, including significant obligations to its top three creditors and the insolvent hedge fund Three Arrows Capital.
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