March 27, 2024
Bankruptcy Court Lifts Hold: FTX and BlockFi Claims Settlement Moves Forward
Latest Cryptocurrency News

Bankruptcy Court Lifts Hold: FTX and BlockFi Claims Settlement Moves Forward

The claims settlement proceedings between the bankrupt crypto companies FTX and BlockFi are now permitted to proceed, as ordered by a U.S. bankruptcy court judge. The automatic holding on these proceedings has been lifted, allowing FTX debtors to advance their arguments and counterclaims regarding the BlockFi claims in the FTX bankruptcy case. This development stems from the Chapter 11 bankruptcy filings by both FTX and BlockFi in November 2022, following FTX’s collapse earlier that month.

Judge Michael Kaplan’s order, dated Nov. 13, signifies a pivotal moment in the resolution of disputes between the two entities. BlockFi, facing approximately $355 million in frozen funds on the FTX platform and an additional $671 million owed by Alameda Research, is now part of the negotiation process within the FTX bankruptcy proceeding.

The court directive explicitly states that FTX debtors are not entitled to an affirmative distribution from the BlockFi Debtors. Both parties are instructed to promptly file for mediation with the U.S. Bankruptcy Court for the District of Delaware. The mediation process is mandated to commence “no later” than Dec. 24, 2023, facilitating discussions and potential resolutions.

The backdrop to this legal development includes BlockFi CEO Zac Prince’s testimony against Sam Bankman-Fried during a five-week criminal trial, resulting in Bankman-Fried’s conviction on all charges. Prince and the BlockFi team presented evidence on Oct. 13, asserting that BlockFi’s bankruptcy filing would have been avoidable if FTX had not experienced a collapse, irrespective of the prevailing bear market conditions. BlockFi incurred significant losses, surpassing “a little over a billion dollars,” in the aftermath of FTX and Alameda’s downfall.

Notably, BlockFi had received court approval in August to repay its U.S.-based Wallet customers, albeit with temporary withdrawal restrictions. Subsequently, in September, creditors greenlit a bankruptcy restructuring plan proposed by BlockFi, gaining court approval on Sept. 26. By Oct. 24, BlockFi publicly announced its commencement of repayments to some creditors, with withdrawals becoming available to nearly all Wallet customers.

Image by freepik

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