BlockFi’s clients may fully recoup as a result of the insolvent cryptocurrency businesses’ $1 billion settlement of their legal fight.

According to a court filing dated March 6, bankrupt cryptocurrency companies BlockFi and FTX have struck a settlement “in principle” wherein FTX would stop pursuing claims against BlockFi and pay up to $874.5 million to BlockFi.

Judge John Dorsey of the United States Bankruptcy Court in Wilmington, Delaware, has the authority to approve the settlement’s terms.

In addition to FTX waiving “millions of dollars of avoidance claims and other counterclaims” against BlockFi, the settlement would address BlockFi’s claims against FTX, which were estimated to be worth a billion dollars.

The $185.2 million claim against FTX.com, which is the equivalent of the value of the assets held by BlockFi customers on the exchange, and the $689.3 million claim against Alameda Research for the loans that the company got from BlockFi make up the $874.5 million.

$250 million of the entire amount will be regarded as a “secured claim,” according to the proposed settlement, and BlockFi will get payment of that amount first when FTX files for bankruptcy. Remainder is subject to FTX’s capacity to pay back its own clients and other creditors first.

The outcome, according to BlockFi’s bankruptcy administrators, was reached via “early mediation,” which reduced the expense of the legal process and made sure “that money reserved for litigation with FTX is directed instead to customer distributions.”

“For BlockFi and its customers, this negotiated agreement represents an excellent outcome—one that was better even on the Plan’s effective date.”
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On November 28, 2022, BlockFi declared bankruptcy under Chapter 11 and claimed to have been affected by the shocking collapse of FTX earlier in the same month.

In 2023, both businesses have filed lawsuits against one another.

Around $900 million in loans to Alameda Research and a $400 million line of credit were the sources of FTX’s over $1 billion debt, according to BlockFi. over all of the loan’s collateral was FTT, the token of FTX, which plummeted over 99% after FTX’s bankruptcy.

In an attempt to reclaim 56 million Robinhood shares that were purportedly promised as security for BlockFi’s loans to Alameda Research, BlockFi also filed a lawsuit against a holding company for Sam Bankman-Fried.

But according to a 2022 rescue loan agreement, BlockFi also owed FTX.US up to $275 million.

BlockFi is said to owe over 100,000 creditors up to $10 billion, of which $1 billion is owed to its three biggest creditors and $220 million is owed to Three Arrows Capital, an insolvent cryptocurrency hedge fund.

Customers of the BlockFi Wallet as well as those who utilized interest-bearing BlockFi accounts might be able to withdraw some funds in 2024; the precise amount is unknown.

In October 2023, BlockFi filed for bankruptcy and launched a wallet to let users to make withdrawals.

SOURCE