April 16, 2024

FTX, BlockFi claims settlement allowed to proceed, judge declares

A U.S. bankruptcy court judge has ordered the end of an automatic holding placed on claims settlement proceedings between the two bankrupt crypto companies FTX and BlockFi.

Bankrupt crypto companies FTX and BlockFi are allowed to proceed in negotiations for their claims settlement, according to a new court filing.

On Nov. 13, United States bankruptcy Judge Michael Kaplan ordered the end of an automatic holding placed on proceedings between the two firms. FTX debtors can now pursue their “arguments, defenses, counterclaims, setoffs, or otherwise” concerning the BlockFi claims in the FTX bankruptcy proceeding.

Both entities filed for Chapter 11 bankruptcy status in November 2022 after the implosion of FTX at the beginning of that month. BlockFi is estimated to have had around $355 million in funds frozen on the FTX platform, with an additional $671 million owed by Alameda Research.

The order also said that FTX debtors would have no right to “receive an affirmative distribution from the BlockFi Debtors” and that both parties should file a mediation with the U.S. Bankruptcy Court for the District of Delaware as soon as possible.

Once filed, mediation will begin “no later” than Dec. 24, 2023.

Related: Sam Bankman-Fried’s legal team moves to pursue theory on FTX terms of service

BlockFi CEO Zac Prince testified against Sam Bankman-Fried during his five-week criminal trial in which the former FTX CEO was found guilty of all charges against him.

Prince and the BlockFi team presented evidence on Oct. 13, which showed that if FTX had not gone under, BlockFi would not have had to file for bankruptcy regardless of ongoing bear market conditions. The company lost “a little over a billion dollars” in the collapse of FTX and Alameda.

BlockFi was allowed by the court in August to repay its U.S.-based Wallet customers, though withdrawals were prohibited at the time. Shortly after, in September, BlockFi creditors approved a bankruptcy restructuring plan, which was then approved by the court on Sept. 26.

On Oct. 24, BlockFi released a blog post saying it would begin paying back some of its creditors and that withdrawals “are currently available to nearly all Wallet customers.”

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