A winding-up petition hearing for the beleaguered Bermudian-based crypto lender, BlockFi International Ltd, was adjourned until June 9 by Chief Justice Narinder Hargun on Friday.

The hearing was a second appearance for the lawyers for BlockFi International and the joint provisional liquidators (JPLs) in the Supreme Court as the company moves toward liquidation.

It had been adjourned for the first time after a court appearance in January so that the JPLs, Ernst & Young Ltd, could prepare a first report for the court.

Steven White of law firm Walkers (Bermuda) Ltd, who appeared on behalf of BlockFi International and the JPLs, asked for the further adjournment for the JPLs to prepare a second report for the court.

Also in court on Friday morning was a representative of a BlockFi creditor, Lisk Foundation, along with their lawyer, to express dissatisfaction with the liquidation process. Lisk Foundation is a non-profit organisation based in Berlin that supports openly available block-chain and provides free blockchain development tools and programmes.

Sam Stevens of law firm Carey Olsen Bermuda, with Guido Schmitz-Krummacher of Lisk Foundation, adopted a watching position for this hearing.

However, Mr Stevens told the Chief Justice that while he was not in court to oppose the application regarding the petition to wind up the company, his client was unhappy about the way the liquidation was being conducted by the JPLs and company directors.

He explained Lisk Foundation had been an investor in BlockFi International. The lawyer said that in Bermuda, under the Digital Asset Business Act (DABA) 2018 rules, assets must be insured so that investors could expect to recover almost all their investment.

Mr Stevens said because the assets of BlockFi International were being pooled with the assets of BlockFi, its US parent company, which is in concurrent liquidation having filed for Chapter 11 in the United States Bankruptcy Court for the District of New Jersey, the Bermuda company creditors would recover a smaller proportion of their investment than they expected.

Mr Stevens said Carey Olsen had sent BlockFi lawyers Walkers a letter about their concerns, and Herr Schmitz Krummacher, the managing director of Lisk Foundation, had come from Switzerland to be in court to demonstrate his own “considerable concern”.

These had not been addressed, said the lawyer, and the JPLs were refusing to disclose the documents which would explain why they had adopted this course for the liquidation.

The JPLs initial response to earlier queries about the situation had been to advise the investor to read the docket in the American case and that would provide the answers, Mr Stevens said. “We reviewed the docket in the American case. The answer is not revealed.”

“The JPLs are refusing to explain why they are not acting in the interest of the Bermuda creditors,” said Mr Stevens. “My client is here, asking: ‘Why are you doing this?’”

Mr Stevens told the Chief Justice that it was the duty of the JPLs to act in the best interests of the creditors. He said it is “… difficult for us to understand why assets of a Bermuda company, which are protected by the DABA regime, are being pooled with US assets. It is not clear why the JPLs are going this route.”

Mr White responded that the JPLs report had been filed with the court and was sealed, but an application to unseal it could be made.

When BlockFi International received its licence only one year ago to operate in Bermuda, chief executive and founder Zac Prince said: “This licence and the sound regulatory framework that Bermuda provides are a strong fit for our global business and our ambitions for the future.”

BlockFi’s exposure to the collapsed giant crypto trader FTX and its associated entity Alameda Research led to the BlockFi and BlockFi International bankruptcies.

The complex financial relationships between the entities has been widely reported to include a $400 million line of credit extended by FTX US to BlockFi on the one hand, and $680 million in loans from BlockFi to Alameda Research.

Lisk Foundation’s January financial report stated: “In January 2023 we reported about a write-off of 6,500,000 USDC that were lent to BlockFi. 2,025,000 USDC were and are still remaining on the books.”

USDC are on par with the US dollar.