FTX and BlockFi Reach $874 Million Settlement Agreement
FTX and BlockFi, two bankrupt firms, have announced an agreement “in principle” to settle their long-standing legal battle. According to a court filing on March 6, FTX has committed to paying up to $874.5 million to BlockFi, marking a potential resolution to the dispute.
Under the terms of the agreement, subject to court approval, BlockFi will receive compensation that includes an allowed customer claim of $185.2 million against FTX.com. This claim represents the full value of assets held on the exchange as of the FTX petition date. Additionally, BlockFi will receive a claim of $689.3 million against Alameda Research, primarily concerning loans extended to the company. Out of this amount, $250 million will be treated as a secured claim, ensuring expedited payment once FTX’s proposed reorganization plan is confirmed.
In addition to the monetary settlement, FTX has agreed to waive or subordinate all other claims against BlockFi, clearing the path for a smoother resolution. This has paved the way for BlockFi’s support of FTX’s proposed reorganization plan and will help close the ongoing legal proceedings. However, the remaining amount depends on FTX’s ability to settle its obligations to its customers and other creditors initially.
BlockFi’s bankruptcy administrators have praised the prompt mediation that led to this agreement. They believe that it has reduced litigation expenses and redirected funds from legal disputes towards customer payouts.
Background: BlockFi’s Financial Troubles and Legal Disputes
BlockFi sought Chapter 11 bankruptcy protection in November 2022 after experiencing financial troubles following FTX’s collapse earlier that month. In 2023, legal disputes emerged between BlockFi and FTX, with BlockFi claiming that FTX owed it over $1 billion.
The disputed amount included a $400 million credit line and nearly $900 million lent to Alameda Research, primarily collateralized by FTX’s token, FTT. At the same time, BlockFi faced liabilities of up to $275 million owed to FTX.US under a rescue loan deal from 2022.
Efforts to resolve the disputes began when Chapter 11 proceedings were initiated. The initial focus was on recovering approximately $185 million in digital assets held on the exchange and around $690 million loaned to Alameda Research. However, counterclaims and competing assertions from FTX complicated the resolution process.
The recent agreement between FTX and BlockFi is a significant milestone in resolving their disputes. FTX has agreed to waive most of its claims against BlockFi, setting the stage for a comprehensive settlement.
Hot Take: A Positive Outcome for BlockFi and Its Customers
The agreement “in principle” between FTX and BlockFi represents an excellent outcome for BlockFi and its customers. This settlement surpasses expectations and will help expedite the resolution process. The agreement’s key points include:
– FTX will pay up to $874.5 million to BlockFi.
– BlockFi will receive a customer claim of $185.2 million against FTX.com.
– BlockFi will receive a claim of $689.3 million against Alameda Research.
– $250 million of the claim against Alameda Research will be treated as a secured claim for expedited payment.
– FTX has waived or subordinated all other claims against BlockFi.
– BlockFi will support FTX’s proposed reorganization plan.
Overall, this settlement is a positive development that brings relief to both parties involved in the legal battle. It also highlights the importance of prompt mediation in reducing litigation expenses and prioritizing customer payouts over legal disputes.
In conclusion, FTX and BlockFi have reached a significant settlement agreement that could potentially resolve their long-standing legal battle. The agreement’s terms include substantial compensation for BlockFi and the clearance of claims against the company. This settlement is a positive outcome for both parties and emphasizes the importance of prompt mediation in bankruptcy cases.
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