A U.S. federal judge issued a temporary restraining order (TRO) against cryptocurrency lender BlockFills in a lawsuit filed by Dominion Capital, temporarily freezing assets related to the dispute, according to a document seen by CoinDesk.
In the February 27 complaint, Dominion alleged that BlockFills misappropriated and illegally retained millions of dollars worth of customer crypto assets, commingled customer assets and concealed significant losses.
Dominion claims that BlockFills concealed the misuse of customer funds and refused to return company assets after suspending withdrawals in February. As part of the complaint, the investment firm sought an asset freeze to protect its cryptocurrencies trapped on the Blockfills platform, which the court has granted.
In an order filed on March 3 in the U.S. District Court for the Southern District of New York, federal Judge Mary Kay Vyskocil prohibited the company from transferring or disposing of 70.6 Bitcoins Assets allegedly belong to Dominion or were transferred outside the United States while the case was ongoing.
The court also ordered Blockfills, which is backed by trading giant Susquehanna, to account for and segregate customer funds, including Dominion’s Bitcoin, pending a hearing on a possible preliminary injunction.
CoinDesk reported last month that the cryptocurrency lender suffered about $75 million in losses during the recent market downturn and was looking for buyers or emergency funding.
BlockFills is a Chicago-based cryptocurrency trading and lending firm that provides liquidity, financing and risk management services to institutional clients. Its platform provides cryptocurrency lending, derivatives trading and over-the-counter (OTC) execution for hedge funds, asset managers, market makers and mining companies.
A Blockfills spokesperson said the company does not comment on pending litigation as a matter of policy. Dominion Capital declined to comment.
A temporary restraining order in the United States is an emergency court order that temporarily prevents someone from taking specific actions until a full court hearing is held. It is often used in legal disputes involving money, assets or financial activities to prevent immediate harm.
The TRO was issued without notice to BlockFills, and the court said there was a risk of “immediate and irreparable harm,” noting that the company had suspended customer withdrawals and that bankruptcy could be imminent.
BlockFills has until March 17 to respond, at which time the interim order will expire unless the court extends it.
Dominion Capital is a New York-based private investment firm and family office that invests in private equity, structured finance and digital assets, including backing Bitcoin mining companies such as Bitfarms (BITF).
hard times
Blockfills said that due to recent market and financial conditions, the company will cease customer withdrawals and deposits on February 11.
The company said at the time that it was working with investors and customers to quickly reach a resolution and restore liquidity to the platform. CoinDesk later learned that the cryptocurrency lender suffered losses of approximately $75 million in the recent market downturn and was looking for a buyer or emergency funding.
CoinDesk also reported that Blockfills co-founder and CEO Nicholas Hammer has resigned from his leadership role. The company’s website currently lists Joseph Perry as interim CEO.
Blockfills said that by 2025, the company will process more than $60 billion in transaction volume, a 28% increase from the previous year, and is one of the most active institutional cryptocurrency lending platforms. It serves approximately 2,000 institutional clients, including hedge funds, asset managers and mining companies.
“The company is now heading toward insolvency very quickly,” said Thomas Braziel, an insolvency professional and founder of 117 Partners.
“After something like this happened, no serious institution approached the platform,” Basil said. “They’re going to have to file for bankruptcy.”
The New York Law Journal first reported news of the Dominion complaint on Monday.
Read more: Blockfills co-founder and CEO Nicholas Hammer resigns
