FTX and BlockFi Reach Settlement, FTX to Pay up to $874 Million
During a volatile period in the cryptocurrency market in 2022, FTX sought rescue financing from BlockFi.
Bankrupt crypto companies FTX and BlockFi have come to a settlement agreement, potentially amounting to a substantial payout of up to $874 million. Court documents filed on Wednesday reveal that FTX has agreed to pay BlockFi, with the settlement awaiting approval from U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, per Reuters news report.
The dispute between the two entities originated from their collapses in 2022, leading to mutual lawsuits seeking to recover funds loaned between them before their bankruptcies. Under the terms of the settlement, FTX will prioritize an initial $250 million payment to BlockFi. The remaining amount hinges on FTX's efforts to repay its customers and creditors as part of its bankruptcy proceedings.
Before their downfall, FTX and BlockFi maintained a close relationship, with BlockFi extending loans to FTX's affiliated hedge fund Alameda Research. During a volatile period in the cryptocurrency market in 2022, FTX sought rescue financing from BlockFi.
FTX's potential payment to BlockFi includes up to $689 million related to the Alameda loans, with the first $250 million guaranteed. The remainder is contingent on FTX's ability to fulfill its obligations to other stakeholders. Additionally, FTX will pay BlockFi an additional $185.3 million to account for funds held in FTX trading accounts at the time of the exchange's collapse.
However, FTX's ability to fully repay its customers remains uncertain, according to an FTX attorney. Similarly, BlockFi faces challenges in repaying its own customers who held interest-bearing accounts, with estimates suggesting account holders may receive between 39.4% and 100% of their account value.
As part of the settlement, BlockFi will drop its lawsuit concerning 56 million Robinhood shares allegedly pledged as collateral for loans to Alameda. These shares were seized by the U.S. Department of Justice following the arrest of FTX founder Sam Bankman-Fried, who was convicted in November 2023 for embezzling $8 billion from FTX customers. Bankman-Fried is scheduled for sentencing on March 28 and plans to appeal his conviction.
The resolution of this dispute marks a great step forward for both FTX and BlockFi as they navigate the complexities of their bankruptcies and work towards fulfilling their obligations to creditors and customers.
