Bankrupt Crypto Firms FTX And BlockFi Given Green Light To Negotiate Settlement

In a significant development, US Bankruptcy Judge Michael Kaplan has made a ruling to lift the stay suit, enabling the resumption of trial proceedings in the ongoing legal dispute between cryptocurrency lender BlockFi and failed crypto exchange FTX. 

According to recent reports, the decision paves the way for BlockFi and FTX to engage in mediation for finalizing claims settlements. 

Counterclaims Allowed

BlockFi, a lender operating in cryptocurrency, filed for bankruptcy in late November last year, citing various factors, including the ripple effects of FTX’s sudden collapse earlier that month. 

This triggered an automatic stay, effectively halting proceedings between the two parties. BlockFi found itself in a predicament with an estimated $355 million frozen on the crypto exchange’s platform, and it was owed an additional $671 million by FTX’s sister company, Alameda Research.

The stay has now been modified to allow the FTX Debtors to assert, defend, counterclaim, set-off, or otherwise deal with the BlockFi Claims in the FTX bankruptcy proceedings, according to a court order issued by US Bankruptcy Judge Michael Kaplan.

In late September, BlockFi’s creditors approved a bankruptcy restructuring plan to recover the assets lost to FTX and those lost when crypto hedge fund Three Arrows Capital collapsed in the summer of 2022.

As previously reported by Bitcoinist, BlockFi has successfully emerged from bankruptcy. According to the lending company’s announcement, the company’s management, advisors, and stakeholders have dedicated “extensive efforts” to achieve this milestone, distinguishing BlockFi from many other retail crypto companies in terms of recovery.

On the other hand, Sam Bankman-Fried, the founder of FTX, recently faced legal repercussions. Following a five-week trial, Bankman-Fried was found guilty on all seven counts of defrauding his customers and lenders at the beginning of this month.

FTX Transfers $24 Million Worth Of Assets To Exchanges

In recent moves, cryptocurrency exchange FTX has deposited substantial assets to other exchanges. Within the past five hours, the bankrupt exchange transferred assets worth $24 million to Kraken and OKX. 

These assets included 250,000 SOL ($13.5 million), 8.27 million MATIC ($7.41 million), and 1,500 ETH ($3.1 million). The motive behind these transfers and their implications remain undisclosed.

Moreover, FTX and its affiliate Alameda have made notable transfers totaling $438 million, comprising 42 different assets to multiple exchanges. The entities involved have not disclosed the specifics of these transfers, including their purpose, recipients, and underlying strategy.

According to the on-chain analytics platform SpotOnChain, FTX’s liquidity in SOL appears to be relatively limited. Currently, FTX holds only 3,408 SOLs, valued at approximately $179,000. This relatively small liquidity suggests potential challenges in fulfilling large-scale SOL transactions on the exchange.

However, despite the limited liquidity, the exchange and its affiliates still hold significant SOL under long-term lock-up. According to CoinGecko data, they have 42.2 million SOL, estimated at $2.19 billion, locked up until 2027 or 2028. This implies that most of these SOL assets will remain frozen and inaccessible for several years.

Featured image from Shutterstock, chart from TradingView.com