Bankrupt crypto lender BlockFi has reached a preliminary agreement with FTX and Alameda Research that could potentially result in the firm receiving around $874 million pending judicial approval. This settlement aims to repay BlockFi customers who suffered losses due to the collapse, bringing them closer to financial recovery.
BlockFi, FTX, and Alameda Reach Settlement:
โ The settlement involves FTX paying up to $874 million to BlockFi, with a priority payment of $250 million. This payment will compensate BlockFi for the assets held on FTX and the loans extended to Alameda Research.
โ The remaining settlement amount will depend on FTXโs ability to repay its other creditors and customers.
โ As part of the agreement, FTX will drop its claims against BlockFi, allowing the lenderโs remaining claims to be paid out like other claims under FTXโs plans.
โ However, the settlement is still subject to judicial approval.
Relationship Between FTX and BlockFi:
โ The origins of this settlement can be traced back to the strained relationship between FTX and BlockFi during the 2022 crypto market crash.
โ This market crash revealed the extent of FTXโs misuse of customer funds, leading to legal and financial challenges for both companies.
โ The settlement marks a significant step towards resolving these issues and allows BlockFi to reclaim a substantial portion of its assets.
โ Bankruptcy administrators attribute the possibility of this settlement to an early mediation process that reduced litigation costs, enabling more funds to be allocated to customer distributions.
Positive Outcome for BlockFi and Its Customers:
โ BlockFiโs claims against FTX for the full value of loans to Alameda and assets on the FTX exchange will be compensated under the negotiated agreement.
โ The settlement also waives clawback claims by FTX that could have diminished BlockFiโs claims.
โ This outcome is considered excellent for BlockFi and its customers, surpassing expectations at the time of the effective date of the Plan.
BlockFiโs Bankruptcy Filing and Debts:
โ BlockFi filed for bankruptcy in November 2028 due to its significant exposure to FTX.
โ Both BlockFi and FTX filed lawsuits against each other in 2023, with BlockFi claiming that FTX owed it $1 billion.
โ This amount includes a $400 million line of credit and nearly $900 million lent to Alameda Research, collateralized by FTXโs FTT token, which lost value following the FTX collapse.
โ BlockFi also sued a holding company for Sam Bankman-Fried to recover 56 million in Robinhood shares.
โ On the other hand, BlockFi also owed FTX.US $275 million as part of a 2022 rescue loan deal.
โ The total debt owed by BlockFi amounts to nearly $10 billion, with over 100,000 creditors, including $1 billion to its largest creditors and $220 million to bankrupt crypto hedge fund Three Arrows Capital.
Progress in FTXโs Recovery Efforts:
โ FTX has been making significant progress in its attempts to recover funds, recently approving the sale of its stake in AI firm Anthropic.
โ This divestment strategy is expected to inject approximately $1 billion into FTXโs estate, improving its ability to meet its creditor obligations.
Hot Take: A Step Closer to Financial Recovery ๐ธ๐
โ BlockFi reaching a settlement agreement with FTX and Alameda Research is a significant development in the bankruptcy proceedings.
โ If approved, this settlement could potentially enable BlockFi to reimburse its customers who suffered losses.
โ The resolution highlights the importance of early mediation in reducing litigation expenses and prioritizing customer distributions.
โ However, judicial approval is still required for the settlement to be finalized, and the fate of BlockFiโs customersโ financial recovery remains in the hands of the court.
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