BANKRUPT crypto companies FTX and BlockFi have resolved their disputes stemming from the companies’ collapses in 2022, with FTX agreeing to pay BlockFi up to US$874 million, according to court documents filed on Wednesday (Mar 6).
The settlement is subject to approval by US bankruptcy judge John Dorsey in Wilmington, Delaware.
The two companies 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 prioritise a US$250 million payment to BlockFi, and the remainder of the settlement is contingent on its efforts to repay its own customers in bankruptcy.
The two 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 the summer 2022.
FTX could pay BlockFi up to US$689 million on account of the Alamexa loans, but only the first US$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 US$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 had previously agreed to repay FTX up to US$275 million from the 2022 rescue loan, but only if it can first repay its own customers in full.
BlockFi has said it is unlikely to fully repay customers who had interest-bearing BlockFi accounts. The company previously estimated that those customers might receive between 39.4 per cent and 100 per cent of the value in their accounts.
As part of the agreement, BlockFi agreed to drop its lawsuit over 56 million in Robinhood shares that were allegedly pledged as collateral for BlockFi’s loans to Alameda. Those equity shares were later seized by the US Department of Justice when FTX founder Sam Bankman-Fried was arrested.
Bankman-Fried was convicted in November 2023 of stealing US$8 billion from FTX customers. He is set to be sentenced on Mar 28, and is expected to appeal his conviction. REUTERS
