• Judge denied BlockFi users the possibility of recovering $300 million in Bitcoin from the bankrupt lending platform.
• The ruling followed a critical lack of communication between BlockFi and its users regarding ownership of funds.
• Several other companies, such as Voyager Digital and Celsius Network, had similar cases during bankruptcy proceedings.
BlockFi Bankruptcy
A US Bankruptcy Judge has ruled against a petition to recover $300 million in Bitcoin from BlockFi, dealing a major setback for some of its users. Following turmoil in the crypto space that caused several crypto lenders to collapse, BlockFi filed for bankruptcy in 2022.
Judge’s Decision
The decision by Judge Michael Kaplan denied users the right to their assets on the platform as they unintentionally forfeited their right to them. This is considered standard procedure in similar cases, with judges also siding with other crypto companies when it came to determining who owned certain funds held in interest-bearing accounts.
FTX Collapse
The situation was worsened due to the collapse of FTX which was the parent entity of several lenders including BlockFi. Customers were then left struggling over questions regarding ownership of their funds during bankruptcy proceedings at other companies like Voyager Digital and Celsius Network.
Critical Lack Of Communication
Judge Kaplan cited a critical lack of communication between BlockFi and its customers concerning ownerships rights as the basis for his ruling on this particular case. In November 2022, shortly before filing for bankruptcy, Blockfi froze accounts but did not fully disable client-facing functions on its app resulting in confusion over account types leading up to Judge Kaplan’s decision.
Conclusion
In conclusion, judge Michael Kaplan has ruled against allowing some BlockFi users to recover their Bitcoin investments totaling $300 million dollars due mainly to a critical lack of communication between both parties concerning ownership rights prior to filing for bankruptcy in 2022 following large scale turmoil within the crypto space resulting from collapses such as FTX’s