Moshin Meghi, BlockFi's bankruptcy administrator, and the U.S. Department of Justice (DOJ) have resolved a contentious $35 million lawsuit, approved by Judge Michael B. Kaplan in New Jersey Bankruptcy Court on July 11, 2025. The dispute originated in May 2023 when the DOJ sought to transfer funds from BlockFi accounts linked to two Estonian nationals convicted of fraud, claiming warrants entitled the government to these assets.
BlockFi filed for Chapter 11 bankruptcy in November 2022 following FTX's collapse, exposing $1.03 billion in unpaid loans to the failed exchange. Unsecured creditors sued the DOJ, fearing asset seizures would reduce recoveries from BlockFi's $10 billion debt to 100,000 creditors—including Ankura Trust, the SEC, and Three Arrows Capital. The DOJ argued bankruptcy courts couldn't override its claims, but both parties ultimately agreed to dismiss the case with prejudice, barring future litigation, with each covering their legal costs.
This settlement permits BlockFi to resume creditor distributions via Coinbase, signaling strengthened bankruptcy court authority in crypto cases. Analysts view it as a precedent for equitable resolutions, highlighting systemic risks in crypto lending—70% of lenders faced liquidity issues post-FTX per PwC. The ruling emphasizes collaborative regulation to rebuild market trust amid ongoing U.S. crypto legislation debates.