Bankrupt cryptocurrency firms BlockFi and FTX have come to a preliminary agreement to settle their disputes, as stated in a court filing on March 6. Under the agreement, FTX will pay BlockFi up to $874.5 million and drop its claims against the company. The settlement terms are subject to approval by U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware.
The settlement aims to resolve BlockFi’s claims against FTX, which amount to approximately $1 billion. Additionally, FTX will waive “millions of dollars of avoidance claims and other counterclaims” against BlockFi.
The $874.5 million includes 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.
According to the proposed settlement, $250 million of the total amount will be treated as a “secured claim,” prioritizing payment to BlockFi after FTX emerges from bankruptcy. The remaining amount will depend on FTX’s ability to repay its own customers and other creditors.
BlockFi’s bankruptcy administrators have stated that the agreement was reached through early mediation, which reduced litigation costs and allowed the money reserved for litigation to be directed towards customer distributions.
In November 2022, BlockFi filed for Chapter 11 bankruptcy protection due to its exposure to the collapse of FTX. The two companies had previously sued each other in 2023. BlockFi claimed that FTX owed it over $1 billion, which included a $400 million line of credit and nearly $900 million lent to Alameda Research. The loan was primarily collateralized by FTX’s token, FTT, which experienced a significant drop in value due to FTX’s collapse. BlockFi also sued a holding company for Sam Bankman-Fried, seeking to recover 56 million Robinhood shares that were allegedly pledged as collateral for BlockFi’s loans to Alameda Research. However, BlockFi also owed FTX.US up to $275 million under a rescue loan deal in 2022.
Estimates indicate that BlockFi owes up to $10 billion to over 100,000 creditors, including $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund Three Arrows Capital.
In addition to BlockFi Wallet customers, those who used an interest-bearing BlockFi account are expected to be able to withdraw some assets in 2024, although the exact payout amount is unclear.
BlockFi emerged from bankruptcy in October 2023 and launched a wallet to facilitate customer withdrawals.
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