Crypto Lender BlockFi Ordered to Withdraw Unapproved Reorganization Plan Shared ‘Prematurely’

Bankrupt crypto lender BlockFi has withdrawn statements relating to a wind-down plan published May 13 following an order from a U.S. bankruptcy court, court filings show.

The estate was required to issue a “corrective letter” clarifying that the documents were posted prematurely and without court approval, an emergency order issued May 18 by New Jersey Bankruptcy Court Judge Michael B. Kaplan said.

The documents in question had said some $1 billion in claims against commercial counterparts like collapsed crypto exchange FTX and its trading arm Alameda will be the “largest driver” in the success of getting creditors their money back. “The purpose of the disclosure statement is to provide clients with the information that they need to make an informed decision about whether to vote to accept our plan,” the company tweeted at the time.

The BlockFi estate has been at odds with its creditors after filing for bankruptcy in November, with the latter blaming the firm’s poor management and subsequent restructuring plans for its demise as recently as May 15.

The court-ordered letter – which BlockFi posted on its official Twitter account on Friday – says it has yet to approve the estate’s “ability to solicit acceptances of its plan.”

“A disclosure statement must be approved by the Court before any party may lawfully encourage you to accept or reject any plan of reorganization,” the letter said.

The creditors and other parties do not support the reorganization plan, the corrective letter said. The Official Committee of Unsecured Creditors “believes that the plan provides releases of litigation claims against, among others, current and former directors and officers of BlockFi that committed significant misconduct that harmed BlockFi and its customers.”

The next date for the bankruptcy hearing is set for June 20.