Creditors of failed cryptocurrency lending platform BlockFi are seeking liquidation of the firm’s assets, citing allegations of fraud and misconduct against the company and its CEO, Zac Prince.
The unfolding financial crisis at BlockFi, a former cryptocurrency lending institution, has entered a new chapter with its creditors petitioning for the company’s liquidation. Allegations of misconduct, including “fraud, dishonesty, incompetence or gross mismanagement,” have been directed at the company and its CEO, Zac Prince.
Furthermore, it is claimed that the bankruptcy resolution process is being intentionally delayed to buy time for the senior management to negotiate legal safeguards.
Details outlined in a document lodged at the New Jersey Bankruptcy Court earlier this week, suggest that BlockFi is exploiting this delay to negotiate immunity for its senior officials, who are allegedly accountable for loans granted to FTX’s subsidiary, Alameda Research. This development was first reported by CryptoX.
Creditors, seemingly frustrated with the situation, have urged an end to what they perceive as calculated stall tactics. Their plea stated, “It is time for the Debtors’ unsecured creditors to finally come to know what BlockFi truly was, who Zac Prince truly is, how much he personally profited from the company, and what he and certain of his colleagues were doing when no one was watching.”
The court document makes it clear that previous attempts at mediation have not been successful and negotiations are currently at a stalemate. With no fresh revenue inflow and losses accruing, the creditors are pushing for the case to be classified as a liquidation.
They are critical of BlockFi’s management for maintaining high administrative costs, which includes paying salaries for over 100 staff members, who, according to the creditors, “have had little to do but work on their golf game.”
Furthermore, the creditors have alleged that “the Debtors are intentionally burning on average more than $16 million per month, merely to augment defensive positions for historical management.” This insinuates that the company’s resources are primarily being utilized to fortify its management against the ongoing financial turmoil, rather than to address its deepening debts.
As this bankruptcy case continues to evolve, it will provide insights into the veracity of these claims and potentially influence the wider cryptocurrency lending sphere.
