FTX, Alameda Reach Potential $874.5M Settlement With BlockFi

FTX and Alameda Research have reached an "in-principle" agreement with BlockFi.

BlockFi filed for Chapter 11 bankruptcy along with eight of its affiliates in November 2022. The firm said that it had “significant exposure” in the form of obligations owed to BlockFi by FTX-linked hedge fund Alameda, assets on the FTX platform, and an undrawn credit line from FTX.

FTX had given BlockFi a $400 million line of credit via its legal name West Realm Shires Services. The firm was one of BlockFi's biggest creditors with a $275 million claim. BlockFi claimed FTX owed it over $1 billion.

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Recent court filings reveal a settlement in which BlockFi will receive $874.5 million in claims against FTX and Alameda Research.

Some $185.2 million represents a claim against FTX, representing the value of BlockFi customer assets on the exchange, while $689.3 million comes from a claim against Alameda Research for its loans from BlockFi. The loan was collateralized using FTX's FTT token.

$250 million will be treated as a "secure claim," prioritizing payment to BlockFi after FTX resolves its bankruptcy, contingent on FTX repaying its own creditors first. FTX will drop its claims against BlockFi as part of the deal.

"We’re pleased to have been able to reach a result, with the assistance of Judge Goldblatt, that allows BlockFi’s claims against FTX for the full value of loans to Alameda and assets on the FTX exchange, waives 'clawback' claims by FTX that could diminish those claims, and provides BlockFi with a partially secured claim," said Kenneth Aulet, partner at Brown Rudnick, which represented the Committee of Unsecured Creditors.

"[It is] an excellent outcome for BlockFi’s customers and creditors," Aulet added.

Recently, US Bankruptcy Court Judge Michael Kaplan approved a settlement between bankrupt crypto lender BlockFi and bankrupt crypto hedge fund 3AC.

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However, Kaplan declined to unseal the settlement agreement on the grounds it would be "counterintuitive" to do so. The US Trustee objected to the seal, stating the debtors had not justified the seal.

BlockFi argued that the terms were commercially sensitive and could impact litigation against FTX.