The troubled crypto company has approximately $160 million in loans secured by 68,000 Bitcoin mining rigs.
As per reports, the New Jersey-based company began the loan bidding process last year.
After the collapse of FTX, BlockFi filed for Chapter 11 bankruptcy in late November.
In a Bloomberg report on January 24, two "familiar with the subject" believe that BlockFi began the process of selling off the loans last year.
The crypto lender filed Chapter 11 bankruptcy in November 2022, citing its demise on its considerable exposure to the crypto exchange FTX.
However, some of these loans have already failed since then. Meanwhile, considering the drop in the price of Bitcoin mining equipment, they may be undercollateralized. Also, the deadline for bidders to submit loan bids is January 24.
On the development, crypto lawyer Harrison Dell, said that if the value of the Bitcoin mining equipment used as collateral is less than the amount of the loans. This indicates that the loans are "not worth their paper value to BlockFi anymore."
Dell stated that the people bidding on the debts are most "likely" debt collection companies looking to buy for "cents on the dollar."
He went on to say that selling the debt is most likely "all that the administrators" of BlockFi can salvage for these assets. Dell also emphasized that this is only the beginning of what the crypto sector will see.
BlockFi's attempt to sell its debts is most likely part of its efforts to pay off its creditors, of which the company has over 100,000 according to its bankruptcy filing in November 2022.
At the time of its bankruptcy, BlockFi reportedly sold $239 million of its own crypto holdings to cover bankruptcy expenses. In addition, the company informed around 70% of its employees that they would lose their jobs in the near future.