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FTX and Alameda Research's Principle Settlement with BlockFi Approaches $874M

Three (royally) failed crypto companies strike a settlement deal 

A glimmer of hope emerged for embattled crypto lender BlockFi on March 6th. A court filing revealed a pivotal agreement "in principle" between BlockFi, the bankrupt estates of FTX and Alameda Research, to settle outstanding disputes for a massive $874.5 million. It's definitely an important step towards resolving nearly a billion dollars in claims.  The agreement, which hinges on approval by U.S. Bankruptcy Judge John Dorsey, could pave the way for a comprehensive recovery for BlockFi's customers.  Furthermore, the proposed settlement includes FTX relinquishing its claims against BlockFi, potentially leading to a full recuperation of customer assets.

Details of the settlement

The intricacies of the settlement reveal a meticulously structured agreement where FTX is to compensate BlockFi with up to $874.5 million. This sum breaks down into a $185.2 million claim related to BlockFi customer assets on FTX.com, and a substantial $689.3 million claim against Alameda Research for loans extended by BlockFi. Within this framework, $250 million is designated as a "secured claim," ensuring BlockFi's preferential repayment post-FTX's bankruptcy resolution. 

The remainder hinges on FTX's capability to settle its own customer and creditor accounts. This strategic arrangement emerges from an "early mediation" effort, significantly reducing litigation expenses and redirecting funds towards customer reimbursements. Described by BlockFi's bankruptcy administrators as a highly favorable outcome, this agreement surpasses initial expectations, spotlighting a potential for optimal customer recovery amidst the ongoing turmoil.

Implications for BlockFi's future

With an agreement to receive up to $874.5 million, BlockFi's pathway to reimbursing its customers becomes increasingly tangible. This financial infusion is anticipated to significantly mitigate the repercussions of the shock collapse of FTX, which had precipitated BlockFi's own bankruptcy filing in November 2022. 

As BlockFi navigates through its post-bankruptcy phase, the ability for wallet customers and those with interest-bearing accounts to commence withdrawals in 2024 marks a critical milestone. This proactive approach towards customer asset recovery underscores BlockFi's resilience and commitment to its users, potentially setting a precedent for transparency and accountability in the crypto industry.