(Bloomberg) -- Failed crypto lender BlockFi Inc. won bankruptcy court approval on its plan for shutting down its business, a milestone that could result in customers getting back a portion of what they’re owed by the end of the year.

Judge Michael Kaplan said during a hearing Tuesday he would approve BlockFi’s liquidation plan which was supported by a committee representing customer interests and creditors that voted to support it. Some BlockFi creditors are slated to receive partial repayment in Bitcoin or Ethereum, according to court documents.

BlockFi unsecured creditors could get between roughly 35% to 63% of what they’re owed, according to an August court filing. The amount creditors ultimately receive hinges on whether BlockFi succeeds in litigation against FTX and other bankrupt crypto firms. BlockFi has said the outcome of its disputes with Sam Bankman-Fried’s platform and failed crypto hedge fund Three Arrows Capital could swing creditor recoveries by $1 billion.

The liquidation plan was approved after BlockFi settled a dispute with the creditors committee over potential legal claims against the company’s senior management. BlockFi largely blamed its failure on FTX, which melted down last year amid allegations of fraud, while the committee alleged management ignored red flags before lending to Bankman-Fried’s platform.

Judge Kaplan said Tuesday he’d overrule challenges by the US Justice Department’s bankruptcy watchdog and other stakeholders to legal releases benefiting BlockFi senior managers which are contained in the liquidation plan.

The committee said in a Monday court filing that BlockFi’s bankruptcy has, at times, been a bitter process but that the settlement avoided administrative expenses that could have reduced customer recoveries. Despite several challenges during the Chapter 11 case, BlockFi is now poised to repay customers faster than other bankrupt crypto firms, the committee said.

The committee said it’s hopeful payments to BlockFi creditors will commence this year.

BlockFi paused customer withdrawals on Nov. 10, just before FTX collapsed into bankruptcy. When BlockFi filed Chapter 11 later that month, the crypto lender intended to restructure the business but determined earlier this year that a liquidation was the best option for repaying customers. 

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

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