- The company’s administrator and the DOJ agreed to drop a $35 million lawsuit over seized crypto assets.
- A U.S. judge dismissed the case with prejudice, closing a chapter in BlockFi’s bankruptcy.
A long-running legal standoff between bankrupt crypto lender BlockFi and the U.S. Department of Justice ended in a dismissal. A federal judge approved a settlement that closes the $35 million asset transfer dispute for good.
The U.S. Bankruptcy Court for the District of New Jersey approved the deal on Friday, according to court filing. Under the agreement, both parties consented to dismiss the case with prejudice—meaning the DOJ cannot refile the claim. Each side will also cover its own legal expenses.
The case centered on crypto funds originally held in BlockFi accounts but tied to two Estonian citizens accused of fraud. Though unrelated to BlockFi’s operations, the DOJ argued it had valid warrants to seize the funds and attempted to claim them during BlockFi’s bankruptcy proceedings in 2023.
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Jurisdictional Tension Between DOJ And Bankruptcy Court
At the time, the DOJ insisted the bankruptcy court lacked authority to block the transfer of funds, while BlockFi’s administrator maintained the assets were part of the estate under bankruptcy protection. That jurisdictional clash led to months of litigation before both sides agreed to settle.
The dismissal comes as BlockFi continues to shut down operations. In May 2023, the company announced it would discontinue its web platform and work with Coinbase to enable customers to withdraw their remaining crypto. Clients with eligible accounts—such as BlockFi Interest Accounts and retail loans—were given a withdrawal deadline of April 28, 2024.
The firm filed for Chapter 11 bankruptcy in November 2022, following the high-profile collapse of FTX. In September 2023, a U.S. bankruptcy judge approved BlockFi’s restructuring plan aimed at repaying over 10,000 creditors.
BlockFi also resolved an $875 million claim against the FTX and Alameda Research estates in early 2023. The agreement settled approximately $1 billion in intercompany disputes. During court proceedings, CEO Zac Prince blamed FTX founder Sam Bankman-Fried for BlockFi’s downfall.
BlockFi’s total liabilities exceed $10 billion, with more than 100,000 creditors awaiting repayment. Among its top claims are debts to institutional lenders and the now-defunct hedge fund Three Arrows Capital.
