Judge John Dorsey of the United States Bankruptcy Court in Wilmington, Delaware, must approve the settlement.
The two businesses filed a lawsuit against one another in 2023 in an attempt to recoup loans they had made to one another prior to their respective bankruptcies in November 2022. As per the updated deal, FTX committed to giving priority to paying BlockFi $250 million, with the remaining amount depending on its ability to reimburse its own clients in bankruptcy.
The two businesses were closely associated prior to the market crisis of 2022, which exposed FTX’s pervasive misappropriation of client cash. BlockFi lent money to Alameda Research, a hedge fund connected to FTX, which then looked to FTX for bailout money in the midst of a tumultuous summer 2022 cryptocurrency market.
Due to the Alamexa loans, FTX may have to pay BlockFi up to $689 million; however, only the first $250 million is guaranteed. The balance is subject to FTX’s capacity to pay back its own clients and other creditors first, as stated in court filings submitted to the bankruptcy courts in Delaware and New Jersey.
In order to make up for the money BlockFi had in its FTX trading accounts when the cryptocurrency exchange failed in 2022, FTX additionally promised to pay BlockFi an extra $185.3 million.
According to an FTX attorney in January, the company aims to fully reimburse its own consumers, but that outcome is not assured.
Prior to this, BlockFi had promised to reimburse FTX up to $275 million from the 2022 rescue loan, but only after it had fully reimbursed its own clients.
According to BlockFi, it is unlikely that users with interest-bearing BlockFi accounts would receive their full refund. According to an earlier estimate from the corporation, those consumers might get anything from 39.4% to 100% of the value in their accounts.
According to the terms of the deal, BlockFi dropped its lawsuit against Robinhood (HOOD.O) for 56 million shares, and also opened up additional tab shares that were purportedly pledged as security for BlockFi’s loans to Alameda. After FTX founder Sam Bankman-Fried was taken into custody, the U.S. Department of Justice subsequently confiscated those stock shares.
In November 2023, Bankman-Fried was found guilty of stealing $8 billion from clients of FTX. In addition to expected to appeal his verdict, his sentencing is scheduled for March 28.
