BlockFi, the cryptocurrency lending platform that filed for Chapter 11 bankruptcy in November 2022, has settled a $35 million lawsuit with the U.S. Department of Justice (DOJ), closing its ongoing bankruptcy proceedings. The settlement, approved by Judge Michael B. Kaplan of the U.S. Bankruptcy Court for the District of New Jersey on July 11, 2025, dismisses the case with prejudice, ensuring it cannot be reopened.
The lawsuit, initiated in May 2023, centered on a dispute over $35 million in crypto assets held in BlockFi accounts linked to two Estonian nationals involved in a separate criminal fraud investigation. The DOJ sought to seize these funds, asserting it had valid warrants and that the bankruptcy court lacked jurisdiction to block the transfer. BlockFi’s bankruptcy administrator, Mohsin Meghji, argued that the assets were part of the company’s estate and subject to bankruptcy protections. The settlement resolves this jurisdictional conflict, with both parties agreeing to cover their own legal costs.
“This resolution removes a major legal hurdle, allowing us to focus on maximizing recoveries for creditors and customers,” said Meghji in a statement. Senior trial counsel Seth B. From the Civil Division’s Commercial Litigation Branch, Shapiro was the representative of the DOJ.
BlockFi’s bankruptcy was triggered by the collapse of FTX in November 2022, which exposed significant liquidity issues. The company owes approximately $10 billion to over 100,000 creditors, including major debts to institutional creditors and the bankrupt hedge fund Three Arrows Capital. In September 2023, the bankruptcy court approved BlockFi’s Chapter 11 plan, enabling structured repayments to creditors.
As part of its wind-down, BlockFi shut down its web platform in May 2024 and partnered with Coinbase to facilitate customer withdrawals. Eligible clients, including those with BlockFi Interest Accounts, retail loans, and private client holdings, were directed to claim funds through Coinbase by April 28, 2024.
The settlement follows another major resolution in March 2024, when BlockFi reached an $875 million agreement with the bankruptcy estates of FTX and Alameda Research, resolving roughly $1 billion in competing claims. BlockFi CEO Zac Prince previously testified that actions by FTX founder Sam Bankman-Fried contributed significantly to the company’s collapse.
The DOJ settlement is a pivotal step in BlockFi’s efforts to navigate its complex bankruptcy process. Industry observers note that this case highlights the evolving intersection of crypto regulation, bankruptcy law, and federal enforcement, potentially setting a precedent for handling crypto asset disputes in insolvency proceedings.
As BlockFi continues its liquidation, creditors and customers await further distributions. The crypto community is closely watching, hoping for improved regulations and risk management to prevent similar collapses in the future.
