Bankrupt crypto lending company BlockFi is reportedly planning to sell $160 million in loans secured by around 68,000 Bitcoin mining machines in a bankruptcy filing.
In a Jan. 24 Bloomberg report, two people “familiar with the matter” allege that BlockFi started selling the loans last year.
The crypto lender filed for Chapter 11 bankruptcy in November 2022, citing its significant exposure to now-defunct crypto exchange FTX for its downfall.
However, some of those loans have since defaulted and may be undercollateralized given the fall in Bitcoin mining equipment prices, the sources said, and the last day for bidders to bid on the loans is Jan. 24.
In comments to Cointelegraph, crypto attorney Harrison Dell, a director at Australian law firm Cadena Legal, explained that if the bitcoin mining equipment used as collateral is worth less than the value of the loans, the loans “are no longer worth their paper value to BlockFi are”.
Dell said the people bidding on the debt are “most likely” debt collectors buying for “cents on the dollar.”
He added that selling the debt is likely “all the administrators can salvage” for BlockFi for those assets.
Dell also hinted that this is just the beginning of what’s to come for the crypto industry. He noticed:
“This is just the start of asset sales by BlockFi and other crypto firms in Chapter 11 bankruptcy in the US.”
Cointelegraph reached out to BlockFi for comment but received no response at the time of publication.
BlockFi’s attempt to liquidate its loans is likely part of an effort to pay off its creditors, which the company has over 100,000 creditors according to its bankruptcy filing in November 2022.
At the time of its bankruptcy, it was reported that BlockFi had sold $239 million of its own cryptocurrency assets to cover bankruptcy costs and warned about 70% of its employees that they would lose their jobs.
Related: The BlockFi bankruptcy filing sparks a variety of community reactions
Earlier this week, BlockFi petitioned the court in a Jan. 23 statement to release funds to allow bonuses for key employees to keep under Chapter 11 bankruptcy proceedings.
Megan Crowell, BlockFi’s chief people officer, told the court that without financial incentives, the company was unlikely to retain its employees.
Crowell said it was very likely that many employees would leave the company without competitive compensation, noting that this would have further financial repercussions for the company later on.
