In a court document published on Monday, the BlockFi Creditors Committee continued its verbal battle with the management of the bankrupt digital assets lender.

Creditors called BlockFi’s story that it was a victim to FTX and Alameda a “false narrative” and blamed its failure on poor managerial decisions and subsequently, the restructuring agents.

The creditors committee noted that BlockFi had converted approximately $240 million of cryptocurrency to fiat in the days following the FTX collapse. This resulted in significant losses for BlockFi and possible tax issues for its customers. BlockFi deposited the proceeds, along with an additional $10,000,000 into Silicon Valley Bank. This bank collapsed later.

Creditors wrote that “SVB did not have the strength necessary to meet the Bankruptcy Code protection requirements. The United States Trustee objected to the estate money being deposited at SVB.” Creditors wrote that a deal was eventually reached in which SVB agreed to post enough collateral (in the shape of a bond), should a bank fail.

Creditors said that BlockFi did not follow through on this. Neither did the restructuring team. No bond was posted. The creditors wrote: “It is a good thing that the federal government intervened to bail out BlockFi and all SVB depositors.”

Creditors argued BlockFi also spent $22.5 Million of customer funds on a $30 Million insurance policy for its officers and directors.

CoinDesk Market Data shows that bitcoin (BTC), since the November 2022 lows, has gained almost 63%. Creditors claim that nearly $100 million was lost in value because that decision to sell then. A portion of the document has been redacted. This includes key paragraphs in which the creditors explain their belief that the BlockFi team engaged in “false narrative”.

Court Listener: A portion of the court file that has been redacted

Court Listener: Another part of the court file that has been redacted

Recovery is dependent on FTX & Alameda

BlockFi, in the wake of its bankruptcy triggered by FTX’s collapse, is expected to return almost $300 million to users of custodial wallets, as per a recently issued ruling. It will retain $375 million on its interest-bearing account.

The company was able to recover $4.7 million through the sale of mining rigs. However, the recovery is more significant when it comes to the claims made against Alameda, FTX. Around $355 million worth of cryptocurrency has been frozen at FTX.

BlockFi will be back in court by June 20.

Parikshit Miishra is the editor.