BlockFi Approved to Set up Auction for Crypto Mining Business

Steven Church and Amelia Pollard, Bloomberg News

The BlockFi logo on a smartphone arranged in the Brooklyn borough of New York, US, on Thursday, Nov. 17, 2022. Cryptocurrency lender BlockFi Inc. is preparing to file for bankruptcy within days, according to people with knowledge of the matter who asked not to be named because discussions are private. Photographer: Gabby Jones/Bloomberg , Bloomberg

(Bloomberg) -- BlockFi Inc. won bankruptcy court approval to set up an auction for the crypto lender’s digital coin mining business.

The company wants to get bids in as quickly as possible to take advantage of current market conditions, BlockFi lawyer Francis Petrie said during a video court hearing Monday morning. The company has already gotten some initial bids for various assets and expects more, Petrie told US Bankruptcy Judge Michael Kaplan.

“We’ve received substantial interest in the market for bidding purposes and current volatility in the cryptocurrency market, which means we need to act quickly,” Petrie said.

BlockFi is selling computer equipment used for mining digital coins at a time when the crypto mining business is on the upswing. Last week, another bankrupt crypto platform, Celsius Network, said it’s aiming to sell tens of thousands of mining machines.

Bids for the mining assets are due Feb. 20 and an auction will be held about one week later, Petrie said. The company will return to court in March for approval of any proposed deal that comes out of the auction.

BlockFi, which is based in Jersey City, New Jersey, filed for bankruptcy in November with plans to either sell or reorganize its business in order to repay creditors. Any assets the company doesn’t put up for auction would be restructured as part of a proposal to exit bankruptcy, Petrie said in court.

BlockFi was a major financier for Bitcoin miners, which were battered last year by low prices and soaring electricity costs, through loans backed by the computer rigs. In recent months profitability has risen as power costs tumbled, lawyers for Celsius said in a court hearing last week.

Struggling Bitcoin miners and bankrupt lenders have created an expanding market for distressed assets. Crypto-mining firm Bitdeer backed by Chinese billionaire Jihan Wu set up a $250 million distressed fund, while the largest digital asset manager Grayscale launched an entity to invest in Bitcoin mining hardware with its sister company Foundry to capitalize on the distressed mining sector.

The case is BlockFi Inc., 22-19361, U.S. Bankruptcy Court for the District of New Jersey (Trenton).

--With assistance from David Pan.