FTX Trading reaches global settlement agreement with BlockFi

By Sarah Lizee

Olympia, Wash., March 7 – FTX Trading Ltd. is seeking approval of a global settlement agreement with BlockFi Inc., according to a motion filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

FTX said the settlement resolves many complex disputes with BlockFi, one of its largest creditors, without the cost and delay of litigation.

It also facilitates the marshalling of substantial assets by the debtors for distribution to creditors under a Chapter 11 plan that, without the settlement, would be trapped in multi-jurisdictional litigation, FTX added.

BlockFi asserted over $1 billion of claims against FTX, comprising about $689 million in principal amount of loan claims asserted as secured, about $469 million of customer claims, and unliquidated litigation claims.

FTX didn’t dispute the loan’s principal amount being owed but did dispute that the loan claims are validly secured – which is the main conflict between the parties.

The settlement grants BlockFi a partially secured claim in the amount of $250 million, with the remainder of the loan claims allowed as general unsecured claims.

FTX said 65% of the loan claims will be treated as unsecured and thus BlockFi will bear the majority of the risk with respect to unsecured claim recoveries.

In exchange for providing BlockFi with a partially secured loan claim, the debtors obtained BlockFi’s agreement to cooperate to bring into FTX’s estates all of the collateral purportedly pledged by the debtors to BlockFi relating to the loans, including over $600 million from the sale of Robinhood Markets, Inc. class A common stock seized and held by the Department of Justice, and some Solana coins held in a joint custody account at Coinbase worth about $100 million.

“None of these assets would otherwise be available for distribution to creditors prior to final resolution of the BlockFi litigation,” FTX said in the motion.

FTX has headquarters in the Bahamas and filed Chapter 11 bankruptcy on Nov. 11, 2022 under case number 22-11068.

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