Bankrupt crypto lender BlockFi has reached an “in principle” agreement with the estates of FTX and Alameda Research, which could see the firm receive nearly $874 billion pending judicial approval.
The settlement could result in repaying BlockFi customers impacted by the collapse and bring them to the brink of financial recovery after suffering immense losses.
BlockFi, FTX, And Alameda Settle
According to a court filing, the settlement will see FTX pay up to $874 million to BlockFi. Under the settlement terms, FTX will prioritize a $250 million payment to BlockFi as the company looks to be compensated for the assets held on FTX and the loans extended to Alameda Research. The remainder of the settlement amount is contingent on FTX’s ability to repay other creditors and its own customers.
FTX will also drop its claims against BlockFi, allowing the crypto lender’s remaining claims to be paid out like other claims under FTX’s plans. However, this agreement is subject to judicial approval. The origins of the settlement can be traced back to a close yet complicated relationship between FTX and BlockFi. This relationship fractured during the 2022 crypto market crash, which revealed the extent of FTX’s misuse of customer funds and eventually led to legal and financial challenges for both companies.
The resolution allows BlockFi to reclaim a significant portion of its assets, significantly raising the chances of its customers being fully compensated. Bankruptcy administrators added that the settlement was possible thanks to an “early mediation” that significantly cut litigation. This meant money set aside for legal expenses could be redirected to customer distributions.
“We’re pleased to have been able to reach a result, with the assistance of Judge Goldblatt, that allows BlockFi’s claims against FTX for the full value of loans to Alameda and assets on the FTX exchange, waives “clawback” claims by FTX that could diminish those claims, and provides BlockFi with a partially secured claim. 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.”
A Complicated Past
BlockFi filed for bankruptcy on November 28th, citing significant exposure to FTX. Both companies sued each other in 2023, with BlockFi stating that FTX owed it $1 billion. This figure came from a $400 million line of credit and nearly $900 million lent to Alameda Research, which was collateralized exclusively by FTX’s FTT token, which lost its value following the FTX collapse. Additionally, BlockFi sued a holding company for Sam Bankman-Fried to recover 56 million in Robinhood shares.
However, BlockFi also owed FTX.US $275 million as part of a 2022 rescue loan deal. Estimates have revealed that BlockFi owes nearly $10 billion to over 100,000 creditors. This includes $1 billion to its largest creditors and $220 million to bankrupt crypto hedge fund Three Arrows Capital.
FTX Recovery Making Progress
Meanwhile, FTX’s efforts to claw back funds have also seen considerable progress, with the exchange recently approving the sale of its stake in AI firm Anthropic. FTX’s strategy of divesting its assets is expected to inject around $1 billion into FTX’s estate, significantly enhancing its ability to meet creditor obligations.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
