Bankrupt crypto firms BlockFi and FTX have come to a preliminary agreement to settle their disputes, according to a court filing on March 6. Under the proposed settlement, FTX would pay up to $874.5 million to BlockFi and drop its claims against the company. The terms of the settlement are subject to approval by U.S. Bankruptcy Judge John Dorsey.
The settlement would resolve BlockFi’s claims against FTX, which amount to approximately $1 billion. In addition, FTX would waive “millions of dollars of avoidance claims and other counterclaims” against BlockFi. The $874.5 million payment includes a $185.2 million claim against FTX.com, representing the value of BlockFi customer assets held on the exchange, as well as a $689.3 million claim against Alameda Research for loans received from BlockFi.
According to the proposed settlement, $250 million of the total sum would be treated as a “secured claim,” prioritizing payment to BlockFi after FTX emerges from bankruptcy. The remaining amount is contingent on FTX’s ability to repay its own customers and other creditors.
BlockFi’s bankruptcy administrators stated that the agreement was reached through early mediation, which reduced litigation costs and allowed for money reserved for litigation with FTX to be directed towards customer distributions.
BlockFi filed for Chapter 11 bankruptcy protection in November 2022, citing exposure to the collapse of FTX. The two companies had previously sued each other. BlockFi claimed that FTX owed it over $1 billion, which came from a $400 million line of credit and nearly $900 million lent to Alameda Research. BlockFi also sued a holding company for Sam Bankman-Fried, seeking to recover 56 million Robinhood shares pledged as collateral for loans to Alameda Research. However, BlockFi itself owed FTX.US up to $275 million under a rescue loan deal.
Estimates suggest that BlockFi owes up to $10 billion to over 100,000 creditors. This includes $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund Three Arrows Capital. BlockFi emerged from bankruptcy in October 2023 and opened a wallet for customer withdrawals.
In addition to BlockFi Wallet customers, those who used an interest-bearing BlockFi account may also be able to withdraw some assets in 2024, although the exact payout is unclear.