FTX and Alameda agree to a preliminary settlement with BlockFi, agreeing to pay $874M.

Bankrupt cryptocurrency firms BlockFi and FTX have come to an “in principle” agreement to settle their disputes, according to a court filing on March 6. Under the settlement, FTX will pay up to $874.5 million to BlockFi and drop its claims against the company. The terms of the settlement still need to be approved by U.S. Bankruptcy Judge John Dorsey in Delaware. The agreement will resolve BlockFi’s claims against FTX, which amount to approximately $1 billion, and will also see FTX waive “millions of dollars of avoidance claims and other counterclaims” against BlockFi. The $874.5 million includes a $185.2 million claim against FTX.com, representing the value of BlockFi customer assets held on the exchange, and a $689.3 million claim against Alameda Research for the loans it received from BlockFi. The proposed settlement designates $250 million 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 customers and other creditors first. BlockFi’s bankruptcy administrators stated that the settlement was achieved through early mediation, reducing litigation costs and ensuring that funds reserved for legal proceedings with FTX will instead be directed towards customer distributions. BlockFi filed for Chapter 11 bankruptcy protection in November 2022, citing its exposure to the collapse of FTX. The two companies had sued each other in 2023. BlockFi alleged that FTX owed it over $1 billion, consisting of a $400 million line of credit and nearly $900 million lent to Alameda Research. The loan was primarily collateralized by FTX’s token, FTT, which experienced a significant drop in value due to FTX’s collapse. BlockFi also sued a holding company associated with Sam Bankman-Fried, seeking to recover 56 million Robinhood shares that were allegedly pledged as collateral for BlockFi’s loans to Alameda Research. However, BlockFi also owed up to $275 million to FTX.US under a rescue loan deal made in 2022. Estimates suggest that BlockFi owes up to $10 billion to over 100,000 creditors, including $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund Three Arrows Capital. In addition to BlockFi Wallet customers, those who used an interest-bearing BlockFi account may be able to withdraw some assets in 2024, although the exact payout amount is uncertain. BlockFi emerged from bankruptcy in October 2023 and launched a wallet to facilitate customer withdrawals.