BlockFi Claims To Pay $15M Settlement To Investor

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The company’s lawyers claimed that BlockFi had repaid an investor $15 million to settle a threatened lawsuit. 

Lawsuit Threat Settled With $15M

Bankrupt crypto lender BlockFi is attempting to repay its investors. In a recent hearing of bankruptcy court, the company’s lawyers claimed that in the summer of 2022, BlockFi executives had paid a sum of $15 million to an investor who had threatened to sue the company because of its plummeting equity value. 

The investor, who was addressed only as Counterparty A, had purchased equity shares that were issued as part of executive compensation packages. Back in 2022, the shares held a higher value due to the company’s $6 billion valuation. However, the year wreaked havoc across the industry in the form of the collapse of the FTX ecosystem, resulting in plummeting values of BlockFi shares. 

Executives Paid Out Of Own Pocket

According to BlockFi attorney Joshua Sussberg, the investor threatened to sue as they claimed that BlockFi and its executives should have been more open about the contagion risks in such an event. However, the charges were dropped after the settlement payment was made. 

Of the $15 million, BlockFi founder Zac Prince contributed the majority of $6.144 million. 

Sussberg said, 

“I think the important takeaway here is that there was no situation where insiders were pulling money off the platform on the eve of or anywhere near this bankruptcy file … So this is not the Celsius case where management extracted value on the eve of the file.”

BlockFi & FTX Drama

BlockFi shares dropped in value significantly due to the company’s exposure to FTX. The crypto exchange extended an emergency loan to the lending platform on July 1, 2022. The loan opened doors for FTX to buy BlockFi for $240 million, thus establishing a maximum value for existing equity. This buyout price resulted in the founder Zak Prince losing $412.82 million in equity stake as well as caused him to miss out on a planned $600,000 bonus payment. The downfall of the lending platform also led to the layoffs of 20% of the BlockFi workforce. Although an employee bonus package is in the works for court approval, unfortunately, Prince and other higher management will not be considered for it. The platform has also appealed to the courts for permission to return frozen assets from BlockFi wallets to users. 

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The lending platform had filed for bankruptcy protection in November 2022, just weeks after the FTX ecosystem crashed. Both the companies had been tussling over Robinhood shares worth $435 million that BlockFi claimed as collateral on an unpaid debt owed to it by FTX affiliate Alameda Research. Matters got even more complicated with the United States Department of Justice seized the shares. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Source: ryptodaily.co.uk

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