BlockFi received court permission to return money to users who held their funds in the firm’s Wallet program.

According to a CoinDesk report on Thursday, U.S. Bankruptcy Judge Michael Kaplan ruled that users that custodied their digital assets in BlockFi Wallet accounts were entitled to receive their funds, collectively worth $297 million.

However, the same did not apply for funds held on BlockFi Interest Accounts (BIA), which generates interest on deposits. The Judge found that these accounts were part of BlockFi’s lending business, and as such, remained a part of the bankruptcy estate.

It is worth noting that thousands of users attempted to transfer their assets out of these interest accounts and into the BlockFi Wallet account on Nov. 11 after BlockFi halted withdrawals. Some customers even received notifications that their transfers were complete, despite the feature being disabled at the back-end. 

“No transfer request by customers between the BIA and the custodial wallet accounts initiated after 8.15 pm on November 10, 2022 were effectuated and completed,” Kaplan said.

The Judge ruled that BlockFi was entitled to cancel all these transactions. Currently, around $292 million worth of assets are trapped in BIA accounts.

This isn’t the first time that clients of a bankrupt crypto lender have lost out to the laws that govern the bankruptcy process. In January, Bankruptcy Judge Martin Glenn ruled that $4.2 billion worth of cryptocurrency held in Celsius’ interest-bearing Earn Accounts were the property of the bankruptcy estate. Judge Glenn stated that by agreeing to Celsius’ terms of service, users had signed away their ownership rights to these crypto assets.