BlockFi Ends $35 Million Crypto Lawsuit with DOJ as Court Approves Settlement

Highlights:

• The digital asset lender and the DOJ settled a crypto lawsuit to end a key dispute in its bankruptcy case.
• The lawsuit dismissal allows BlockFi to focus on repaying creditors without legal delays in the process.
• BlockFi partnered with crypto exchange Coinbase to allow users to withdraw their assets.

The plan administrator overseeing BlockFi’s bankruptcy and the United States Department of Justice have reached a settlement in a high-stakes crypto asset dispute. Judge Michael B. Kaplan of the U.S. Bankruptcy Court of New Jersey approved the agreement. The case involved more than $35 million in digital assets held in BlockFi accounts. The DOJ had taken measures to seize the funds as part of a criminal fraud investigation involving two citizens from Estonia.

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🚨 Breaking News: BlockFi’s bankruptcy administrator and the DOJ have reached an agreement to dismiss a $35M lawsuit involving crypto asset transfers. This is a significant development in the crypto space! 🪙 #CryptoNews #BlockFi #MercexNews #Mercex

— Mercex (@mercex_io) July 12, 2025

The DOJ held that it had the right to seize the funds under the force of seizure warrants and supported the claim that the bankruptcy court had no right to prevent the transfer. This position generated a legal battle during the Chapter 11 proceeding of BlockFi. The administrator contested the stand by the Department of Justice and tried to safeguard the right of the estate to keep the assets. Eventually, both sides agreed to dismiss the case with prejudice, which prevents any future refiling. They also agreed to pay their own legal costs.

BlockFi’s wind-down estates were represented by Mohsin Meghji, who served as the plan administrator. Judge Kaplan granted the settlement after the court revised the agreement. This result established the conclusion to a legal battle that potentially would have prevented the redistribution of assets back to the creditors.

BlockFi’s Wind-Down Moves Ahead After Crypto Lawsuit Resolution

BlockFi declared bankruptcy in November 2022 after FTX collapsed. The crypto lender lost heavily through its exposure to FTX and Alameda Research. Zac Prince, the CEO of BlockFi, appeared before the court to testify that the collapse of the company was prompted by the actions of the founder of FTX, Sam Bankman-Fried.

In March of last year, BlockFi reached a settlement with FTX, a once-leading centralized cryptocurrency exchange, and Alameda Estates worth a total of $875 million. The settlement paid off nearly $1 billion worth of claims. The bankruptcy court accepted the Chapter 11 repayment plan of BlockFi, which aimed to return funds to more than 10,000 creditors affected by the bankruptcy.

The company owed around $10 billion to creditors at the time of filing for bankruptcy court. These included debts to Three Arrows Capital and BlockFi’s top unsecured creditors. In the process of the wind-down, BlockFi has partnered with Coinbase to help users get their remaining assets.

BlockFi, which was based in New Jersey, reported that it was shutting down its web-based platform in May last year. Customers who had interest accounts, retail loans, and personal accounts were allowed to use Coinbase to make their withdrawals.

Dismissed Case Clears Path for Creditor Recoveries

The DOJ settlement eliminates one of the biggest legal obstacles to the BlockFi bankruptcy estate. The settlement of the crypto lawsuit allows the administrator to proceed without any delays. Through the resolution of this controversy, the estate will enable people to concentrate on business revival and settling creditors. The legal team of BlockFi will now focus on other recovery actions against FTX and Three Arrows Capital.

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