BlockFi seals $875M settlement with Sam Bankman-Fried’s FTX, Alameda Research

Ibrahim Ajibade
Updated: Mar 7, 2024, 02:09 GMT+00:00

Key Points:

  • The long drawn out lawsuit between lender BlockFi and Sam Bankman Fried's FTX Exchange and Alameda Reasearch came to settlement this week.
  • If approved. in-principle agreement to settle $874.5 million in BlockFi’s claims to the defunct FTX and Alameda will help the bankrupt lender to distribute funds to its customers
Sam Bankman-Fried FTX

Bankrupt cryptocurrency lender BlockFi has reached a $874.5 million in-principle settlement with FTX and Alameda Research estates, according to a Wednesday bankruptcy court filing.

The settlement is subject to approval by U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware.

FTX vs. BlockFi Case History

BlockFi and FTX had sued each other in 2023, seeking to recover money they had loaned each other before they both went bankrupt in November 2022. Under the new settlement, FTX agreed to prioritize a $250 million payment to BlockFi, and the remainder of the settlement is contingent on its efforts to repay its own customers in bankruptcy.
The companies had a close relationship before a 2022 market crash revealed FTX’s widespread misuse of customer funds. BlockFi provided loans to FTX’s affiliated hedge fund Alameda Research, and it turned to FTX for rescue financing during a volatile cryptocurrency market in summer 2022.

Possible Settlement Agreed in US Court

FTX could pay BlockFi up to $689 million on account of the Alamexa loans, but only the first $250 million is guaranteed. The remainder is contingent on FTX’s ability to first repay its own customers and other creditors, according to court documents filed in Delaware and New Jersey bankruptcy courts.
FTX also agreed to pay BlockFi an additional $185.3 million, to account for the amount that BlockFi held in its FTX trading accounts when the cryptocurrency exchange collapsed in 2022.
FTX expects to fully repay its own customers, but that result is not guaranteed, an FTX attorney said in January.

BlockFi customers are expected to receive the claims at full value, as long as FTX meets its distribution goals, the filing said.

Out of the $874.5 million, $250 million will be a secured claim, for which there is collateral to prioritize the payment to BlockFi after FTX’s reorganization plan is approved by creditors. “BlockFi ensures that it will receive that $250 million shortly after the FTX plan is confirmed and goes effective – likely allowing a second interim distribution in the near term,” the court filing said.

FTX filed its amended reorganization plan in December 2023, which the company said reflects compromises designed to provide the best outcome for all creditors and stakeholders.

Last month, a U.S. bankruptcy court approved a settlement between BlockFi and Three Arrows Capital, a crypto hedge fund that collapsed in 2022. While the approval settled counterclaims, details of the settlement remain undisclosed.

BlockFi had previously agreed to repay FTX up to $275 million from the 2022 rescue loan, but only if it can first repay its own customers in full.

Upon court approval of the settlement, BlockFi — which was hit by the collapse of FTX in 2022 and filed for Chapter 11 bankruptcy soon after — will receive a customer claim against FTX worth $185.2 million and a claim of $689.3 million from FTX’s sister trading firm Alameda Research, according to the filing.

About the Author

Ibrahim Ajibade Ademolawa is a seasoned research analyst with a background in Commercial Banking and Web3 startups, specializing in DeFi and TradFi analysis. He holds a B.A. in Economics and is pursuing an MSc in Blockchain.

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