Bankrupt FTX, BlockFi Reach Dispute Settlement Arising From 2022 Collapse. All You Need To Know

BlockFi had extended loans to FTX's associated hedge fund, Alameda Research, while FTX had provided rescue financing to BlockFi during a tumultuous period in the cryptocurrency market.

Bankrupt cryptocurrency firms FTX and BlockFi have settled their legal disputes arising from their collapses in 2022. According to recent court filings, FTX has agreed to pay BlockFi a sum of up to $874 million. However, the finalisation of this settlement is pending approval from US Bankruptcy Judge John Dorsey in Wilmington, Delaware, US, as reported by Reuters.

The origins of the legal battle date back to 2023 when both companies initiated lawsuits against each other in an attempt to recover funds that were lent before their respective bankruptcies in November 2022. Under the terms of the new settlement, FTX has committed to prioritising payment of $250 million to BlockFi. The remainder of the settlement amount is contingent upon FTX's efforts to repay its customers amidst bankruptcy proceedings.

Before the market crash of 2022, FTX and BlockFi had a closely intertwined relationship. BlockFi had extended loans to FTX's associated hedge fund, Alameda Research, while FTX had provided rescue financing to BlockFi during a tumultuous period in the cryptocurrency market.

The settlement outlines that FTX could potentially pay BlockFi up to $689 million related to the Alameda loans, with the initial $250 million payment being assured. The subsequent payments are reliant on FTX's ability to fulfil its obligations to its customers and other creditors, as detailed in court documents filed in Delaware and New Jersey.

Furthermore, FTX has agreed to an additional payment of $185.3 million to BlockFi, accounting for the funds held by BlockFi in its FTX trading accounts at the time of the cryptocurrency exchange's collapse in 2022.

Despite FTX's expressed intention to fully reimburse its customers, there are no guarantees, as emphasised by an FTX attorney in January. BlockFi, on the other hand, had previously consented to repay FTX up to $275 million from the 2022 rescue loan, conditional upon its ability to first settle its customer obligations.

As part of the settlement, BlockFi has agreed to drop its lawsuit concerning 56 million shares of Robinhood (HOOD.O) allegedly pledged as collateral for loans to Alameda. These equity shares were confiscated by the US Department of Justice following the arrest of FTX founder Sam Bankman-Fried in connection with accusations of embezzling $8 billion from FTX customers. Bankman-Fried's sentencing is scheduled for March 28, with an expected appeal against his conviction.

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