BlockFi creditors file to liquidate estate, urging an end to the extortion.

Creditors of defunct crypto lender BlockFi have filed to liquidate the company, accusing management, including CEO Zac Prince, of “fraud,” “extortion,” and “mischief” in delaying the resolution of bankruptcy proceedings.

The company is delaying the case in order to negotiate legal releases for its senior management, who are responsible for loans made to FTX’s Alameda Research, according to a committee representing BlockFi’s unsecured creditors. This was stated in a document filed in the New Jersey Bankruptcy Court late Tuesday evening.

The creditors’ filing stated, “It is time to end all of this,” and highlighted that unlike other cases of alleged crypto wrongdoing, such as Sam Bankman-Fried’s FTX, “BlockFi customers do not yet know their story, and this is facilitating case mischief… It is time for the court to order an end to the burn and, thereby, end the extortion tactics.”

The creditors refer to an investigative report into activities at the company, which was previously filed under seal. They claim that the report “reveals, in great detail, that BlockFi (Mr. Prince in particular) perpetrated a fraud on customers.”

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The filing argues that BlockFi is taking unfair advantage of its legal monopoly on proposing a way out of bankruptcy and states, “This case is a liquidation. There is no revenue.”

The filing also mentions that the administrative costs amount to $16 million per month and criticizes the company for continuing to pay salaries to over 100 individuals, many of whom allegedly have little to do except work on their golf game.

Alongside the creditors’ filing, BlockFi has filed an updated plan under Chapter 11 of the bankruptcy code. The amended disclosure statement suggests that holders of BlockFi interest accounts, who are collectively owed around $1 billion, can expect to recover between 39% and 100% of their assets under the bankruptcy plan, compared to 36%-60% if assets are simply liquidated.

Counsel for BlockFi has not yet responded to blockchain’s request for comment.

Edited by Sheldon Reback.