Bankrupt cryptocurrency firms BlockFi and FTX have reportedly reached a preliminary agreement to settle their ongoing dispute, according to a court filing made on March 6. The agreement, which is subject to approval by U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware, involves FTX paying BlockFi up to $874.5 million and dropping its claims against the company.
The proposed settlement aims to resolve BlockFi’s claims against FTX, amounting to approximately $1 billion. Additionally, FTX will waive "millions of dollars in rescission claims and other counterclaims" against BlockFi as part of the agreement. These terms underscore a significant step toward resolving the legal entanglements between the two entities.
The $874.5 million settlement comprises various components, including a $185.2 million claim against FTX.com, representing the value of BlockFi customer assets held on the exchange, and a $689.3 million claim against BlockFi loans received by Alameda Research. A portion of the total amount will be considered a "secured claim" and will be prioritized for payment to BlockFi, contingent upon FTX's ability to fulfill its obligations to other creditors.
The resolution of the dispute was facilitated through "early mediation," as stated by BlockFi's bankruptcy administrator. This approach minimized litigation costs and ensured that funds earmarked for legal proceedings with FTX are directed toward client distributions. The negotiated agreement is viewed as a favorable outcome for BlockFi and its customers, surpassing initial expectations.
BlockFi initiated Chapter 11 bankruptcy protection proceedings on November 28, 2022, following financial turmoil resulting from the FTX crash earlier that month. Litigation ensued between the two companies in 2023, with BlockFi alleging that FTX owed it over $1 billion, including outstanding credit lines and loans extended to Alameda Research, collateralized by FTX's token, FTT, which experienced a substantial loss in value.
Despite the settlement, BlockFi still owes FTX.US up to $275 million under a bailout loan agreement from 2022. The bankruptcy proceedings have highlighted BlockFi's substantial debt obligations, estimated to reach up to $10 billion, affecting over 100,000 creditors. While the terms of asset distribution remain uncertain, both BlockFi wallet customers and interest-bearing account holders are anticipated to gain access to some assets in 2024.
