Insolvent cryptocurrency lending company BlockFi reportedly intends to auction off $160 million in Bitcoin miner-backed loans with the deadline for bidders to submit offers for the loans set for Jan. 24.
According to two “familiar with the situation” sources quoted in a Bloomberg article from January 24, BlockFi began the process of disposing of the loans last year.
In November 2022, the crypto lender filed for Chapter 11 bankruptcy, blaming its demise on a substantial exposure to the now-defunct crypto exchange FTX.
According to the sources, some of these loans have now fallen into default and may not be adequately collateralized given the drop in the cost of Bitcoin mining hardware. They further state that the deadline for bidders to make proposals for the loans is January 24.
Crypto lawyer Harrison Dell, director at the Australian legal company Cadena Legal, said in comments to Cointelegraph that loans are “no longer worth their paper value to BlockFi” if the value of the Bitcoin mining equipment used as collateral is lower than the value of the loans.
According to Dell, debt collection agencies are most “likely” the bidders on the loans since they are purchasing them for “cents on the dollar.”
He said, “The administrators for BlockFi may be able to recover nothing from these assets other than selling the debt.”
Dell said that the future of the cryptocurrency sector is only getting started. He observed:
“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 sell its debts is probably a part of attempts to satisfy its creditors, of whom the firm has over 100,000 as of its bankruptcy filing in November 2022.
According to reports, BlockFi liquidated $239 million of its own cryptocurrency holdings at the time of its bankruptcy to pay the costs and informed almost 70% of its workforce that their jobs would be lost.
BlockFi asked the court in a Jan. 23 statement to release money so that incentives may be given to important staff in an effort to keep them while the Chapter 11 bankruptcy procedures were ongoing earlier this week.
Megan Crowell, chief people officer of BlockFi, said before the court that the firm probably won’t be able to keep its staff around without financial incentives.
Without competitive pay, many employees are quite likely to leave the firm, according to Crowell, who also noted that this would have long-term financial ramifications for the business.