Bankrupt Crypto Firms BlockFi and FTX Agree ‘In Principle’ to Settle Disputes with FTX Paying Up to $874.5 Million to BlockFi.
According to a court filing dated March 6, bankrupt cryptocurrency firms BlockFi and FTX have reached an “in principle” agreement to resolve their disputes. FTX has consented to pay BlockFi a maximum of $874.5 million and has dismissed its claims against the company.
Approval of the settlement terms is pending before Wilmington, Delaware’s U.S. Bankruptcy Judge John Dorsey.
In addition to resolving BlockFi’s approximately one-billion-dollar claims against FTX, the settlement will require FTX to waive “millions of dollars worth of avoidance claims and other counterclaims” brought against BlockFi.
A $185.2 million claim against FTX.com, representing the value of BlockFi customer assets held on the exchange, and a $689.3 million claim against Alameda Research for the loans it received from BlockFi comprise the $874.5 million.
As per the terms of the proposed settlement, $250 million of the overall amount will be regarded as a “secured claim,” thereby granting BlockFi priority payment after FTX’s bankruptcy proceedings. Before receiving the remainder, FTX must satisfy the obligations of its customers and other creditors.
The administrators of BlockFi’s bankruptcy stated that the outcome was reached through “early mediation,” which reduced litigation expenses and “that money reserved for litigation with FTX is directed instead to customer distributions.”
“This negotiated agreement represents an excellent outcome for BlockFi and its customers – one better than could have been anticipated even on the effective date of the Plan.”
November 28, 2022, BlockFi initiated Chapter 11 bankruptcy proceedings, attributing its insolvency to the unexpected demise of FTX earlier that same month. Both firms filed a lawsuit against one another in 2023.
BlockFi asserted that FTX owed it more than $1 billion, of which nearly $900 million was lent to Alameda Research and $400 million was drawn from a line of credit. This loan was collateralized almost exclusively by FTX’s token, FTT, which dropped nearly 99 percent following FTX’s demise.
In an additional lawsuit, BlockFi pursued recovery of 56 million Robinhood shares that were purportedly pledged as security for BlockFi’s loans to Alameda Research against a holding corporation representing Sam Bankman-Fried.
In contrast, BlockFi owed FTX.US a maximum of $275 million per rescue loan agreement from 2022. BlockFi owes an estimated $10 billion to more than one hundred thousand creditors, including $220 million to insolvent crypto hedge fund Three Arrows Capital and $1 billion to its three largest creditors.
Customers of BlockFi Wallets and those who used an interest-bearing BlockFi account are anticipated to be able to withdraw certain assets in 2024; however, the precise amount of the withdrawal is unknown.
In October 2023, following its recovery from insolvency, BlockFi launched a wallet to facilitate customer withdrawals.
