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Crypto Endgame: BlockFi Near Full Recovery After Deal with Bankrupt FTX Empire

Published March 7, 2024 9:14 AM
Teuta Franjkovic
Published March 7, 2024 9:14 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • BlockFi will recover millions from bankrupt FTX and Alameda in a potential win for creditors.
  • FTX prioritized $250 million for repayment, and the exchange withdrew its claim against BlockFi.
  • BlockFi is optimistic about full recovery, with funds freed for customer distributions.

A protracted conflict involving bankrupt cryptocurrency firms is nearing a resolution. Crypto lending company BlockFi is currently finalizing an “in principle” agreement with the bankrupt estates of FTX and Alameda Research.

A court document  filed on Wednesday outlines the settlement terms. It says BlockFi should recover a total of $874.5 million in claims against both FTX and Alameda Research. This news marks a significant step towards concluding the dispute between the crypto entities.

BlockFi Nears Settlement with FTX and Alameda Research

BlockFi has detailed  the breakdown of its $874.5 million settlement claims against FTX and Alameda Research, where $185.2 million represents the value of BlockFi’s assets held on the FTX exchange, and $689.3 million pertains to loans BlockFi extended to Alameda.

As part of the agreement, $250 million of the total claim will be categorized as a secured claim. This means BlockFi will receive priority payment once FTX’s bankruptcy exit plan secures creditor approval.

This arrangement allows BlockFi to proceed with a second interim distribution to its creditors shortly. Furthermore, the agreement includes FTX’s decision to withdraw its claim against BlockFi.

BlockFi Hails Settlement as Major Win for Company and Customers

While awaiting judicial approval for the settlement, BlockFi expressed optimism  this development would significantly advance their goal of achieving full recoveries for their creditors.

BlockFi’s bankruptcy administrators have highlighted their negotiated settlement with FTX and Alameda Research as a remarkable achievement which surpassed expectations.

According to the filing , this agreement not only represents a superior outcome for BlockFi and its clientele but also ensures funds initially earmarked for litigation against FTX will now be redirected towards customer distributions.

Judge Lifts Stay on FTX and BlockFi, Greenlighting Claim Negotiations

FTX’s downfall significantly influenced to BlockFi’s bankruptcy filing. BlockFi, ultimately, attributed a considerable part of its financial woes to the collapse of the cryptocurrency exchange. When it filed for bankruptcy, BlockFi reported having around $355 million in assets on FTX’s platform. Not only that, but it was also owed about $671 million in loans from Alameda.

Following FTX’s bankruptcy filing , an automatic stay was imposed, barring creditors from advancing claims against the company. However, in November, a US judge lifted this stay for the proceedings involving FTX and BlockFi. This move paved the way for both parties to reengage in claim negotiations.

Additionally, the judge ordered FTX and BlockFi  to enter mediation no later than December, marking a critical step towards resolving their disputes and potentially streamlining the path to financial recovery for involved parties.

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