Bankrupt crypto companies FTX and BlockFi have been allowed to proceed in negotiations for their claims settlement, according to a new court filing.
On Nov. 13, United States bankruptcy judge Michael Kaplan ordered the end of an automatic holding placed on proceedings between the two firms. FTX debtors can now pursue their “arguments, defenses, counterclaims, setoffs, or otherwise” concerning the BlockFi claims in the FTX bankruptcy proceeding.
Both entities filed for Chapter 11 bankruptcy status in November of 2022, after the implosion of FTX at the beginning of that month. BlockFi is estimated to have had around $355 million in funds frozen on the FTX platform, with an additional $671 million owed by Alameda Research.
The order also said that FTX debtors would have no right to “receive an affirmative distribution from the BlockFi Debtors” and that both parties should file a mediation with the Delaware Bankruptcy court as soon as possible.
Once such a mediation is filed, mediation will begin “no later” than Dec. 24, 2023.
The CEO of BlockFi, Zac Prince, testified against Sam Bankman-Fried, the former CEO of FTX, during his five-week criminal trial in which he was found guilty on all seven counts.
Prince and the BlockFi team presented evidence on Oct. 13 that had FTX not gone under, BlockFi would not have had to file for bankruptcy, regardless of the ongoing bear market conditions. The company lost “a little over a billion dollars.”
BlockFi was allowed by the court in August to repay U.S.-based Wallet customers, though at the time withdrawals were not permitted. Shortly after, in September, BlockFi creditors approved a bankruptcy restructuring plan, which was then approved by the court on Sept. 26.
On Oct. 24, BlockFi released a blog post saying it will begin to pay back some of its creditors and that withdrawals “are currently available to nearly all Wallet customers.”