BlockFi Says It Repaid Investor $15M To Settle Crypto Crash

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Jan 9 (Reuters) – Executives of bankrupt crypto lender BlockFi Inc have repaid an investor $15 million to settle a threatened lawsuit over the company’s net worth in the summer of 2022, lawyers for the company said on Monday. the company in bankruptcy court.

The settlement resolved the claims of the investor, identified only as ‘Counterparty A’, who purchased shares issued as part of executive compensation, BlockFi attorney Joshua Sussberg told a hearing. in bankruptcy court in Trenton, New Jersey.

The shares were sold at a discount to the company’s January 2022 valuation of $6 billion to $8 billion, but fell in value over the summer as the collapse of two cryptocurrencies caused widespread havoc in the crypto markets.

Investor BlockFi has threatened to sue, alleging that BlockFi and its executives should have been more transparent about contagion risks in the cryptocurrency market, according to Sussberg.

BlockFi deemed the investor’s claims “specious,” but it reached a confidential settlement on Aug. 23 under which BlockFi executives returned $15 million to the investor, Sussberg said.

The largest payout in this settlement was made by BlockFi founder Zac Prince, who repaid $6.144 million.

BlockFi’s dramatic decline in value was highlighted by an emergency loan from crypto exchange FTX on July 1. This loan gave FTX an option to buy BlockFi for $240 million, essentially setting a maximum value for existing equity.

As the company’s value plummeted, BlockFi laid off 20% of its employees. BlockFi will soon seek court approval for an employee bonus package intended to prevent remaining staff from fleeing during its bankruptcy and to compensate employees who previously received equity from the company as part of their paychecks, it said. Sussberg said.

FTX’s buyout price means Prince’s stake lost $412.82 million and caused him to miss a scheduled bonus payment of $600,000, Sussberg said. Prince and other executives will not be included in BlockFi’s upcoming employee retention plan.

New Jersey-based BlockFi filed for bankruptcy protection on November 28, a direct victim of FTX’s collapse a few weeks earlier. FTX founder Sam Bankman-Fried has since been arrested for fraud and has pleaded not guilty.

BlockFi and FTX have been embroiled in a dispute over $465 million in shares of online brokerage Robinhood Markets Inc (HOOD.O) that BlockFi claimed as security for an unpaid debt owed to it by the FTX subsidiary , AlamedaResearch. This dispute was further complicated when the US Department of Justice seized the shares, and a BlockFi attorney said on Monday that the DOJ was in the process of seizing assets held by two or three BlockFi customers based in the state. from Washington.

Reporting by Dietrich Knauth in New York, Editing by Alexia Garamfalvi and David Gregorio

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