A recent court filing has enabled the bankrupt cryptocurrency firms FTX and BlockFi to resume discussions for settling claims between them. U.S. Bankruptcy Judge Michael Kaplan issued an order on Nov. 13, lifting the automatic stay on proceedings between the two companies. This decision permits FTX debtors to present arguments, defenses, counterclaims, or setoffs concerning BlockFi claims within FTX's bankruptcy proceedings.
Both FTX and BlockFi filed for bankruptcy protection in November 2022 following FTX's collapse earlier that month. BlockFi reportedly holds approximately $355 million in frozen funds on the FTX platform, with outstanding debts owed to Alameda Research totaling $671 million.
According to the court order, FTX debtors are not entitled to receive a positive distribution from the BlockFi debtors. The directive emphasizes the necessity for both parties to seek mediation promptly at the U.S. Bankruptcy Court for the District of Delaware. The mediation process is expected to commence "no later than" December 24, 2023.
During a five-week criminal trial where former FTX CEO Sam Bankman-Fried was found guilty of all charges, BlockFi CEO Zac Prince testified against Bankman-Fried. Prince and the BlockFi team presented evidence suggesting that had FTX not gone bankrupt, BlockFi might not have faced bankruptcy despite enduring bearish market conditions. The FTX and Alameda collapse inflicted losses of "just over $1 billion" upon BlockFi.
Previously, in August, a court permitted BlockFi to repay its U.S.-based Wallet customers, albeit with withdrawal restrictions. Subsequently, in September, BlockFi's creditors approved a bankruptcy reorganization plan, which received court approval on September 26. BlockFi announced on October 24 through a blog post that it would start paying off certain creditors, and withdrawals were "currently available to nearly all Wallet customers."
