FTX and BlockFi Allowed to Proceed with Claims Settlement
Bankrupt crypto companies FTX and BlockFi have been given the green light to continue negotiations for their claims settlement, as per a new court filing. The United States bankruptcy Judge Michael Kaplan has lifted the automatic stay on proceedings between the two firms, allowing FTX debtors to pursue their arguments concerning the BlockFi claims in the FTX bankruptcy proceeding.
Both FTX and BlockFi filed for Chapter 11 bankruptcy status in November 2022 following the collapse of FTX at the beginning of that month. BlockFi had approximately $355 million in funds frozen on the FTX platform, along with an additional $671 million owed by Alameda Research.
The court order stipulates that FTX debtors will not receive an affirmative distribution from the BlockFi Debtors and requires both parties to file a mediation with the U.S. Bankruptcy Court for the District of Delaware by Dec. 24, 2023.
Testimony and Restructuring Plans
BlockFi CEO Zac Prince testified against Sam Bankman-Fried during his criminal trial, where Bankman-Fried was found guilty of all charges against him. Prince presented evidence showing that if FTX had not collapsed, BlockFi would not have had to file for bankruptcy despite ongoing bear market conditions.
In August, BlockFi was allowed to repay its U.S.-based Wallet customers, followed by approval of a bankruptcy restructuring plan by creditors in September. This plan was subsequently approved by the court on Sept. 26. On Oct. 24, BlockFi announced that it would begin paying back some of its creditors and that withdrawals were available to nearly all Wallet customers.
Hot Take: The Aftermath of FTX’s Collapse
The lifting of the automatic stay on negotiations between bankrupt crypto companies FTX and BlockFi signifies a significant development in their ongoing claims settlement process. With both firms now able to pursue their arguments and counterclaims concerning the BlockFi claims in the FTX bankruptcy proceeding, this decision sets the stage for potential resolutions to be reached through mediation.
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