- A U.S. judge has lifted the automatic stay in the BlockFi bankruptcy case, allowing FTX to start mediation and file counterclaims.
- BlockFi filed for bankruptcy in November last year, largely due to the collapse of FTX, which affected its financial stability.
In a significant development in the ongoing saga of bankrupt crypto firms, a U.S. bankruptcy judge has ruled to end the automatic stay on proceedings between FTX and BlockFi. This ruling opens the door for FTX to begin negotiating a claims settlement and potentially file counterclaims in the BlockFi bankruptcy case.
Background of the Bankruptcy Case
BlockFi, a cryptocurrency lending firm, was compelled to file for bankruptcy in late November last year, primarily due to the ripple effects caused by the sudden collapse of FTX earlier that month. This unfortunate turn of events had a profound impact on BlockFi’s financial stability, with an estimated $355 million of its assets frozen on FTX’s platform and an additional $671 million owed by FTX’s sister company, Alameda Research.
Ruling and Implications
The recent court order, issued by U.S. bankruptcy judge Michael Kaplan on November 13, modifies the initial automatic stay that halted proceedings between FTX and BlockFi. The modification allows FTX debtors to actively engage in legal strategies, including presenting defenses, counterclaims, and setoffs, concerning BlockFi’s claims in the FTX bankruptcy proceeding.
Testimonies and Trials
The case has seen notable developments, including the trial of Sam Bankman-Fried, the founder of the now-bankrupt FTX. Bankman-Fried was found guilty on all seven counts of defrauding his customers and lenders at the start of November, following a five-week trial.
BlockFi CEO Zac Prince took the stand against Bankman-Fried, detailing the circumstances leading to BlockFi’s bankruptcy. He explained how the firm’s close ties with FTX and Alameda Research, and the subsequent losses of over a billion dollars, were instrumental in forcing BlockFi into bankruptcy.
In late September, BlockFi’s creditors greenlit a bankruptcy restructuring plan. This plan aims to recover the assets lost to FTX and those lost in the collapse of the crypto hedge fund Three Arrows Capital during the summer of 2022.
In conclusion, the lifting of the automatic stay in the BlockFi bankruptcy case marks a pivotal point in the legal entanglements of the crypto world. It allows FTX to participate actively in the proceedings, potentially altering the course of the bankruptcy case. As the situation unfolds, the crypto community and investors continue to closely monitor these developments, recognizing their far-reaching implications in the industry.