In a significant turn of events, U.S. bankruptcy judge Michael Kaplan has issued a ruling to halt the stay suit, allowing the trial to resume in the ongoing legal battle between cryptocurrency lender BlockFi and FTX. This decision opens the door for BlockFi and FTX to engage in mediation for finalizing claims settlements.
Why BlockFi Pursues Settlement?
Here’s a quick recap for those who may be new to the FTX story. Before FTX declared bankruptcy, BlockFi had entered into a substantial deal with FTX, valued at $240 million. However, the collapse of the FTX exchange in November 2022 led to the cryptocurrency lender’s Chapter 11 bankruptcy filing.
BlockFi found itself owed an additional $671 million by FTX’s sister company, Alameda Research and had approximately $355 million frozen on the FTX exchange. During the trial, BlockFi’s CEO, Zac Prince, testified against Sam Bankman-Fried, revealing that the company had incurred losses of “a little over a billion dollars” due to its involvement with FTX and Alameda, ultimately forcing it into bankruptcy.
BlockFi’s creditors have given the green light to its bankruptcy restructuring plan, marking the culmination of an extensive process aimed at winding down the company and reimbursing its clients. Approved by over 90% of creditors, the plan will enable BlockFi to recover assets lost to FTX and the failed hedge fund Three Arrows Capital. To finalize the plan it now awaits approval from the bankruptcy court.
In the latest development on November 13, Judge Michael Kaplan’s ruling allows FTX debtors to present “arguments, defenses, counterclaims, setoffs, or otherwise… concerning the BlockFi claims in the FTX bankruptcy proceeding.”
This decision ensures that FTX debtors can present their case and challenge BlockFi’s claims during the FTX bankruptcy proceeding, promoting a fair and thorough examination of the claims and addressing potential disputes.
The resumption of the trial and the possibility of mediation between BlockFi and FTX mark a critical juncture in this high-stakes legal battle, with both parties eagerly awaiting the court’s final decision. Stay tuned for further updates as this case unfolds.