Judge Michael Kaplan said BlockFi Interest Accounts holders will have to wait for their turn to receive refunds.
BlockFi, a bankrupt cryptocurrency lender, has been authorized by a US judge to reimburse $297 million to its Wallet program depositors.
The news was revealed by the news portal Reuters on May 11th.
Did you know?
Want to get smarter & wealthier with crypto?
Subscribe - We publish new crypto explainer videos every week!
How Does Cryptocurrency Work? (Explained with Animation)
However, it is worth noting that the authorization doesn't apply to customers holding BlockFi Interest Accounts (BIA).
Bankruptcy Judge Michael Kaplan clarified that the funds in these BIAs were used for BlockFi's lending business, thus making them part of the bankruptcy estate. Consequently, these funds will be utilized later to settle the debts of all creditors.
The Wallet program, set apart from BlockFi's other operations, did not yield interest on the deposits made by customers.
Judge Kaplan also decided that at this point, BIA customers who attempted to shift their funds to Wallet accounts will not receive refunds. During the hearing, Judge Kaplan stated:
Quite simply, a customer's withdrawal or transfer request on the user interface did not and does not automatically transfer digital assets.
Interestingly, on November 11th, about 48,000 BlockFi clients endeavored to move $375 million from their BIAs to Wallet accounts.
BlockFi sought Chapter 11 bankruptcy protection in late November following the FTX debacle that led to questions about its financial stability. Court documents indicated West Realm Shires Services Inc. (operating as FTX US) topped the creditors' list along with a $30 million debt to the US Securities and Exchange Commission.
To repay its creditors, BlockFi planned to sell off its crypto mining equipment and $160 million worth of Bitcoin-backed loans. The company currently owes over 100,000 creditors a staggering $10 billion.
According to BlockFi's lawyer Joshua Sussberg, the company is set to present its bankruptcy exit strategy by May 15th.