Bankrupt crypto lending firm BlockFi is reportedly planning to sell off $160 million in loans backed by around 68,000 Bitcoin mining machines as part of its bankruptcy proceedings.
According to a Bloomberg report, two people familiar with the matter claim that BlockFi started the process of selling off the loans last year.
The crypto lender filed for Chapter 11 bankruptcy in November 2022, citing its significant exposure to the now-defunct crypto exchange FTX as the cause of its downfall.
However, some of these loans have already defaulted and could be undercollateralized given the decline in the price of Bitcoin mining equipment, according to the sources. The last day for bidders to submit offers for the loans is January 24.
Crypto lawyer Harrison Dell, 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 “not worth their paper value anymore to BlockFi.”
He added that the people bidding for the debts are most likely to be debt collection businesses buying for “cents on the dollar.”
Dell also suggested that this is just the beginning of what’s to come for the crypto industry. He noted, “This is just the start of the asset sales from BlockFi and other crypto firms in Chapter 11 bankruptcy in the US.”
BlockFi’s attempt to liquidate its loans is likely part of efforts to pay off its creditors, of which, according to its bankruptcy filing in November 2022, the company has over 100,000.
At the time of its bankruptcy, it was reported that BlockFi sold $239 million of its own cryptocurrency assets to cover the bankruptcy expenses and warned approximately 70% of its staff that they would lose their jobs.
In a separate move, earlier this week, BlockFi petitioned the court in a January 23 declaration to release funds to allow bonuses for key employees in a bid to retain them amid the Chapter 11 bankruptcy proceedings.
BlockFi’s chief people officer Megan Crowell told the court that without financial incentives, it’s unlikely the company will be able to retain its employees.