Bankrupt crypto lending firm BlockFi has plans to sell $160 million in loans backed by around 68,000 Bitcoin mining machines as part of bankruptcy proceedings, according to reports.
in a bloomberg report on January 24, two people “familiar with the matter” say that BlockFi began the process of 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 from its crash.
However, some of these loans have since defaulted and could be undercollateralized given the drop in the price of Bitcoin mining equipment, according to the sources, adding that the last day for bidders to bid on the loans is January 24.
In comments to Cointelegraph, crypto lawyer Harrison Dell, director of 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.” for BlockFi”.
Dell said the people bidding on the debts are more likely to be debt collection companies buying for “pennies on the dollar.”
He added that selling the debt is probably “all the managers” of BlockFi can bail out for these assets.
Dell also suggested that this is just the beginning of things to come for the crypto industry. He noticed:
“This is just the beginning of the asset sales of BlockFi and other crypto companies in Chapter 11 bankruptcy in the US.”
Cointelegraph reached out to BlockFi for comment but did not receive a response by press time.
BlockFi’s attempt to pay off its loans is likely part of its efforts to pay off its creditors, which according to its bankruptcy presentation as of November 2022, the company has more than 100,000 creditors.
At the time of its bankruptcy, BlockFi reportedly sold $239 million of its own cryptocurrency assets to cover bankruptcy expenses and warned approximately 70% of its staff that they would lose their jobs.
Related: BlockFi’s bankruptcy filing triggers a wide range of community reactions
Earlier this week, BlockFi asked the court in a Jan. 23 filing to release funds to allow bonuses for key employees in a bid to retain them amid Chapter 11 bankruptcy proceedings.
BlockFi’s chief personnel officer, Megan Crowell, told the court that without financial incentives, the company is unlikely to be able to retain its employees.
Crowell said that many employees are likely to leave the company without competitive compensation, noting that it would add a greater financial impact to the company in the future.
