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 Jan. 24 Bloomberg report, two people “familiar with the matter” said 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 the now-defunct crypto exchange FTX for its collapse.
However, some of these loans have since become overdue and may be undersecured given the fall in the price of bitcoin mining equipment, according to the sources, adding that the last day for applicants to submit bids for the loans is January 24 .
Commenting 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 the paper value to BlockFi “.
Dell said the people bidding on the debts are “most likely” debt collection companies that buy for “cents on the dollar.”
He added that the debt sale is likely “all the administrators” of BlockFi can salvage for those assets.
Dell also suggested that this is just the beginning of what’s to come for the crypto industry. He noted:
“This is just the beginning of asset sales by BlockFi and other crypto firms in Chapter 11 bankruptcy in the US.”
Cointelegraph reached out to BlockFi for comment but did not receive a response by the time of publication.
BlockFi’s attempt to liquidate its loans is likely part of an effort to pay off its creditors, which, according to the company’s November 2022 bankruptcy filing, have more than 100,000 creditors.
At the time of the bankruptcy, it was reported that BlockFi sold $239 million of its own cryptocurrency assets to cover bankruptcy costs and warned approximately 70% of its staff that they would lose their jobs.
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Earlier this week, BlockFi petitioned the court in a Jan. 23 filing to release funds to allow bonuses for key employees in an effort to retain them amid Chapter 11 bankruptcy proceedings.
BlockFi’s chief people officer Megan Crowell told the court that without financial incentives, the company was unlikely to be able to retain employees.
Crowell said it is very likely that many employees will leave the company without competitive compensation, noting that this will add additional financial impact to the company in the future.