BlockFi, a bankrupt cryptocurrency lender, is attempting to reimburse its investors. In a recent bankruptcy court hearing, the firm’s lawyers claimed that BlockFi executives paid $15 million to an investor who threatened to sue the company due to its plunging share value in the summer of 2022.
The investor, identified only as Counterparty A, had purchased equity shares as part of executive compensation packages. The shares were worth more in 2022 due to the company’s $6 billion valuation. However, there was havoc on the market with the collapse of the FTX ecosystem, resulting in the value of BlockFi shares falling.
As per BlockFi attorney Joshua Sussberg, the investor threatened to sue, claiming that BlockFi and its officials should have been more forthcoming about the risks of contagion in such an occurrence. The accusations, however, were dropped after the settlement amount was received.
BlockFi founder Zac Prince provided $6.144 million of the $15 million. According to Sussberg,
“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.”
Because of the company’s exposure to FTX, the value of BlockFi shares has plummeted dramatically. On July 1, 2022, the crypto exchange extended an emergency loan to the lending platform. The financing enabled FTX to purchase BlockFi for $240 million, creating a maximum value for existing shares.
This buyout price led to the founder, Zak Prince, losing $412.82 million in stock and missing out on a $600,000 bonus payment. The failure of the loan platform also resulted in the layoff of 20% of BlockFi’s personnel. Although an employee bonus package is being prepared for court approval, Prince and other upper management will not be considered.
The site has also requested authorization from the courts to restore frozen assets from BlockFi wallets to users.
The loan platform declared bankruptcy in November 2022, just weeks after the FTX ecosystem collapsed. Both companies had been at odds over $435 million in Robinhood shares that BlockFi claimed as collateral for an outstanding obligation owed to it by FTX partner Alameda Research. The shares were seized by the US Department of Justice, complicating matters even further.
Image Credit: Shutterstock
Keep in mind that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.
