A New York judge ruled today that nearly $300 million in crypto deposits held in interest-yielding accounts on BlockFi Inc. belong to BlockFi, not the users. This decision could set a precedent for the FTX case, where customers may not receive their funds back.
US Bankruptcy Judge Michael Kaplan dismissed the objections of a group of BlockFi customers who argued that they retained rights to the coins even before they were moved into a secure, digital wallet. Kaplan ruled that those who kept their assets in interest-bearing accounts gave up certain ownership rights, while those in custodial accounts did not. The ruling is in line with those made in other crypto-company bankruptcies, including a federal judge in New York ruling that Celsius Network owns the coins that users placed in interest-bearing accounts.
The central question in the biggest crypto company bankruptcies revolves around the ownership of digital coins and other assets that customers deposit on unregulated platforms. In the Celsius case, a judge ruled that approximately 600,000 customers do not own the assets they put into their accounts due to the way the user agreements were written.
This ruling could have significant implications for the ongoing crisis at FTX.com, founded by Sam Bankman-Fried. FTX is currently facing a shortfall of as much as $8 billion, and if the firm cannot secure funds to cover the deficit, bankruptcy may be inevitable. The failure of crypto firms Celsius and Voyager has already seen billions in client money tied up in bankruptcy proceedings.
As the FTX case continues, the recent ruling in the BlockFi case may set a precedent for how customer funds are treated in similar situations. If FTX customers end up not getting their funds back, it could lead to further uncertainty and turmoil in the cryptocurrency market.
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