Bankrupt crypto companies FTX and BlockFi have worked out a settlement for their disputes stemming from the companies’ collapses in 2022. The settlement comes after FTX agreed to pay BlockFi up to $874 million, according to court documents filed on Wednesday.
BlockFi has settled with the estates of FTX and Alameda Research for nearly $1 billion dollars. The three companies had a long and complicated relationship, but this settlement brings BlockFi closer to full recovery for customers. The FTX and BlockFi settlement is subject to approval by U.S. Bankruptcy Judge John Dorsey in Wilmington, Delaware.
BlockFi sued FTX
FTX and BlockFi had sued each other in 2023, seeking to recover money they had loaned each other before they both BlockFi and FTX declared bankruptcy in November 2022. Under the new settlement, FTX agreed to prioritize a $250 million payment to BlockFi. The remainder of the settlement is contingent on its efforts to repay its own customers in bankruptcy.
FTX’s misuse of funds
The two companies had a close relationship before a 2022 crypto 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 summer 2022.
FTX BlockFi settlement
FTX could pay BlockFi up to $689 million on account of the Alameda loans, but only the first $250 million is guaranteed. The remainder is contingent on FTX’s ability to first repay its own customers and other creditors, according to lawsuit documents filed in Delaware and New Jersey bankruptcy courts.
FTX also agreed to pay BlockFi an additional $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, as per the company’s attorney.
BlockFi had previously agreed to repay FTX up to $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% and 100% of the value in their accounts.
Robinhood shares
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 U.S. Department of Justice when FTX founder Sam Bankman-Fried was arrested.
Bankman-Fried convicted
Sam Bankman-Fried was convicted in November 2023 of stealing $8 billion from FTX customers. He is set to be sentenced on March 28, and is expected to appeal his conviction.
