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BlockFi, Crypto Lender, Told to Retract Unauthorized Restructuring Plan Shared Too Early

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A U.S. court in charge of bankruptcy ordered the estate to send a letter stating that a disclosure made on May 13 was not authorized. They were also instructed not to ask for support for the restructuring plan.

Bankrupt crypto lender BlockFi has retracted statements about a plan to close down, which were published on May 13. This came after a U.S. bankruptcy court ordered them to do so, as stated in court documents.

The estate was told to send a “corrective letter” explaining that the documents were posted too soon and without court approval. This was stated in an emergency order issued by Judge Michael B. Kaplan of the New Jersey Bankruptcy Court on May 18.

The documents stated that there were approximately $1 billion in claims against commercial counterparts, including the collapsed crypto exchange FTX and its trading arm Alameda. These claims were considered crucial in ensuring that creditors would receive their money back. The company tweeted that the purpose of sharing the documents was to provide clients with the necessary information to make an informed decision about whether to support their plan.

Also Read This: BlockFi shuts down lending operations

BlockFi’s estate and its creditors have been in conflict since the company filed for bankruptcy in November. Creditors have accused the firm of mismanagement and have pointed to its restructuring plans as the cause of its downfall, including as recently as May 15.

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BlockFi shared a letter on its official Twitter account, as required by the court. The letter states that the court has not yet approved the estate’s permission to ask for support or agreement with its plan.

The letter explains that the court needs to approve a disclosure statement before anyone can legally ask you to support or oppose any reorganization plan.

According to the corrective letter, the creditors and other parties do not approve of the reorganization plan. The Official Committee of Unsecured Creditors has expressed their belief that the plan includes provisions that would release current and former directors and officers of BlockFi from legal claims, including those related to serious misconduct that caused harm to BlockFi and its customers.

The next bankruptcy hearing is scheduled for June 20.

Important: This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.

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