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In a significant development, financially troubled firms BlockFi and FTX have announced a groundbreaking agreement to resolve their longstanding disputes. The agreement, described as "in principle," signifies a pivotal step towards closing the legal battles between the two entities.
FTX Commits to $874 Million Settlement
According to details disclosed in a court filing dated March 6, FTX has committed to paying BlockFi up to $874.5 million. This substantial sum marks a potential resolution to the protracted legal feud that has plagued both companies.
Under the terms of the agreement, which is subject to court approval, BlockFi is set to receive compensation that includes a customer claim valued at $185.2 million against FTX.com. This claim represents the entirety of assets held on the exchange as of the petition date for FTX.
Additionally, BlockFi will be entitled to a claim amounting to $689.3 million against Alameda Research, primarily stemming from loans extended to the company. Of this amount, $250 million will be treated as a secured claim, ensuring priority payment to BlockFi once FTX's proposed reorganization plan receives confirmation.
Path to Resolution Cleared
In a significant move towards facilitating a smoother resolution, the failed exchange, FTX, has agreed to waive or subordinate all other claims against BlockFi.
According to CNBC, this pivotal decision clears the path for BlockFi's endorsement of FTX's proposed reorganization plan, thereby contributing to the eventual conclusion of the ongoing legal proceedings. The ultimate resolution hinges on FTX's ability to fulfill its obligations to customers and other creditors at the outset.
Administrators overseeing BlockFi's bankruptcy proceedings have emphasized the role of prompt mediation in achieving this favorable outcome. Mediation has played a pivotal role in facilitating the resolution between BlockFi and FTX by minimizing litigation expenses and reallocating funds from legal disputes toward customer payouts.
Background of the Billion-Dollar Dispute
BlockFi initiated Chapter 11 bankruptcy protection on November 28, 2022, attributing its financial woes to the collapse of FTX earlier that month. Legal wrangling ensued in 2023, with BlockFi asserting that FTX owed it over $1 billion.
A Crypto Potato report says that this substantial sum included a $400 million credit line and nearly $900 million lent to Alameda Research, primarily collateralized by FTX's token, FTT. Concurrently, BlockFi faced liabilities, owing FTX.US up to $275 million under a rescue loan deal struck in 2022.
Efforts to resolve the disputes commenced with the initiation of Chapter 11 proceedings. The primary focus was recouping approximately $185 million in digital assets held on the exchange and around $690 million loaned to Alameda Research.
Despite encountering counterclaims and competing assertions from FTX, the preliminary resolution reached in September 2023 laid the groundwork for the recent agreement, with FTX agreeing to waive most of its claims against BlockFi.
Photo: Microsoft Bing
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