A U.S. district court judge has approved a settlement between BlockFi's bankruptcy administrator and the U.S. Department of Justice, clearing the way for creditor repayments.
Details of the Lawsuit and Settlement
The lawsuit, filed in May 2023, sought the transfer of over $35 million in crypto assets from BlockFi to the U.S. government. The DOJ claimed valid warrants to seize funds from BlockFi accounts belonging to two Estonian citizens charged with fraud. Judge Michael B. Kaplan approved the settlement to dismiss the case with prejudice, meaning it cannot be refiled.
Impact on BlockFi's Bankruptcy
This settlement removes a major legal obstacle in BlockFi's ongoing bankruptcy process, allowing the company to focus on distributing funds to over 10,000 creditors. BlockFi owes approximately $10 billion to more than 100,000 creditors. In March 2024, BlockFi reached an $875 million settlement with FTX, addressing around $1 billion in claims.
Shifts in Cryptocurrency Regulation
The settlement occurs amid changes in federal crypto enforcement priorities. The DOJ has clarified its priorities, narrowing crypto prosecutions to fraud or terrorism cases. Experts suggest that this may set precedents for future asset seizure disputes involving crypto platforms in bankruptcy.
The BlockFi resolution highlights the need for clear legal frameworks in addressing bankruptcy and federal investigations, which will be significant for future cases in the cryptocurrency industry.
