Crypto Lender BlockFi Wins Dispute Over $10M Customer Claim in Bankruptcy Case

News | February 16, 2024 By:

On Thursday, February 8, 2024, the United States Bankruptcy Court for the District of New Jersey issued a ruling in the bankruptcy case of BlockFi Inc., a cryptocurrency lending company.

BlockFi filed for Chapter 11 bankruptcy protection in 2022 amidst a sharp downturn in the crypto market. As a crypto lending platform, BlockFi allowed customers to deposit digital currencies like Bitcoin and Ether and take out cash loans that were secured against the deposited crypto assets.

The court case stemmed from a disputed claim filed by one of BlockFi’s former customers, John V. Van Tubergen Jr. Van Tubergen had taken out over 30 separate loans from BlockFi since 2019 totaling millions of dollars. He deposited cryptocurrency as collateral for the loans. However, in mid-2022, the crypto market crashed significantly. Due to falling prices, the value of Van Tubergen’s collateral declined to a point where it no longer fully covered the loan amounts, triggering margin call provisions.

When Van Tubergen failed to deposit additional collateral to meet margin requirements, BlockFi liquidated some of his existing crypto collateral to make up for the shortfall, as allowed under the loan agreements. However, Van Tubergen disagreed with BlockFi’s calculations and disputed that liquidations were proper. He filed a $10 million proof of claim in BlockFi’s bankruptcy case.

BlockFi then filed an objection to Van Tubergen’s claim, arguing his actual claim based on company books and records was only $19.07. This prompted the court hearing in February 2024 to determine the validity of Van Tubergen’s disputed claim.

In a written ruling, Judge Michael Kaplan analyzed various arguments from both sides related to loan calculations, liquidation notices, and interpretations of the loan terms. Ultimately, the court found that BlockFi properly followed the loan agreements and rejected Van Tubergen’s allegations of improper conduct. The judge determined Van Tubergen failed to adequately prove his large, multi-million dollar claim. As a result, the court ruled in favor of BlockFi and reduced the disputed claim to the $19.07 amount BlockFi stated was valid.

Please contact BlockTribune for access to a copy of this filing.