BlockFi reaches settlement with FTX and Alameda Research, creditors expected to receive full compensation of $875 million

According to a legal document released on the 6th, the bankrupt crypto company BlockFi has reached a tentative settlement of $875 million with FTX and its sister company Alameda Research. If FTX's bankruptcy restructuring plan proceeds successfully, creditors may have the opportunity to receive full claims.

BlockFi Reaches Settlement with FTX and Alameda Research

Recent court documents reveal that BlockFi has reached an $875 million settlement agreement with FTX and Alameda Research, which will help the company distribute funds to its creditors.

The agreement states that BlockFi will receive user claims from FTX worth $185.2 million and claims from Alameda Research worth $689.3 million.

Of the total of approximately $875 million, $250 million is secured debt, which means BlockFi is expected to receive this claim first upon approval of the settlement agreement:

BlockFi will receive the $250 million first, with the possibility of subsequent claims to follow shortly after.

It is reported that the agreement will end BlockFi's original $1 billion claim against FTX, and FTX will also drop its counterclaims and other claims.

Currently, the detailed settlement terms are still subject to approval by Judge John Dorsey of the U.S. Bankruptcy Court in Delaware.

Will Creditors Receive Full Claims?

Additionally, BlockFi's bankruptcy trustee pointed out in the documents that as long as FTX's bankruptcy reorganization proceeds smoothly, BlockFi's users are likely to receive their full claims:

The settlement agreement reached this time is a better result than expected for BlockFi and its users.

It was also added that "we achieved this result through early settlement to reduce litigation costs and ensure that funds originally intended for litigation with FTX can be used to pay users."

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However, the initial bankruptcy filing indicated that BlockFi has over 100,000 creditors, with over $1 billion in assets facing liquidity issues at FTX and its subsidiary Alameda.

Therefore, even if they ultimately receive the $875 million claim, creditors will still incur certain losses.

BlockFi's Road to Recovery

In November 2022, BlockFi filed for bankruptcy protection under Chapter 11 of U.S. bankruptcy law due to the collapse of Three Arrows Capital and FTX.

After a year, BlockFi emerged from bankruptcy in October 2023 and began allowing BlockFi Wallet users to withdraw funds; accounts such as interest-bearing accounts and retail lenders are also expected to open withdrawals this year, although the exact date has not been disclosed.

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Last month, the U.S. Bankruptcy Court approved the settlement agreement between BlockFi and Three Arrows Capital, but the details were sealed, citing sensitive information that could have a negative impact on future litigation.