BlockFi, FTX Reach Tentative $874.5M Settlement in Bankruptcy Dispute
Summary:
BlockFi and FTX, two bankrupt cryptocurrency companies, have reached a tentative agreement to settle disputes. FTX is expected to pay up to $874.5 million to BlockFi and dismiss claims against them. This settlement is subject to approval by a U.S. Bankruptcy Judge. The action resolves BlockFi's claims against FTX, amounting to nearly a billion dollars, and FTX's counterclaims against BlockFi. Part of the payment will prioritize BlockFi after FTX exits bankruptcy. The agreement, achieved through early mediation, curtails legal costs and prioritizes customer distributions.
BlockFi and FTX, two insolvent cryptocurrency companies, have conditionally agreed to resolve their disagreements. The arrangement involves FTX consenting to pay BlockFi up to $874.5 million while renouncing its accusations against BlockFi, as stated in a court document dated March 6. U.S. Bankruptcy Judge John Dorsey, based in Wilmington, Delaware, must approve the settlement terms. The proposed deal would address claims made by BlockFi against FTX, totaling roughly a billion dollars, and would also dismiss FTX's "millions of dollars in avoidance assertions and additional counterclaims" directed towards BlockFi. The $874.5 million is comprised of a $185.2 million claim against FTX.com — representing the worth of BlockFi client assets housed on the exchange — and a $689.3 million claim against Alameda Research for loans it received from BlockFi. The proposition concludes that $250 million of the overall settlement would be denoted as a “secured claim”, prioritizing repayment to BlockFi once FTX reemerges from bankruptcy. The rest is reliant on FTX's capability to repay its clientele and other debtors first. BlockFi's bankruptcy managers lauded the fruition of an “early mediation” that reduced litigation expenses, and ensures that funds otherwise earmarked for litigation with FTX will be reallocated toward customer distributions. BlockFi appealed for Chapter 11 bankruptcy protection on Nov. 28, 2022, citing the unexpected downfall of FTX earlier in the same month. BlockFi had accepted a $400 million credit line from FTX about five months prior in July 2022, and lent close to $900 million to Alameda Research between July and September of the same year. FTX’s digital currency, FTT, almost solely secured that loan, dropping nearly 99% following FTX’s collapse. It's believed that BlockFi owes approximately $10 billion to over 100,000 creditors, including $1 billion to its three top creditors and $220 million to the bankrupt cryptocurrency hedge fund, Three Arrows Capital. BlockFi Wallet customers, alongside users of BlockFi's interest-earning account are anticipated to have the ability to withdraw some assets in 2024, however, the probable payout amount is not yet defined. BlockFi successfully navigated bankruptcy in October 2023, establishing a wallet for customers to withdraw from.
Published At
3/7/2024 4:53:00 AM
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