Bankrupt BlockFi Reimburses $15M to Investor Threatening Lawsuit

• Defunct crypto lender repaired $15 million to an investor threatening a lawsuit.
• The dispute was over BlockFi’s plummeting equity value in the summer of last year.
• BlockFi lawyer said the company executives are yet to withdraw their locked crypto.

The bankrupt crypto lender BlockFi has reimbursed a whooping sum of $15 million to an investor threatening a lawsuit. Reuter revealed the development early today, noting that the dispute was over BlockFi’s plummeting equity value in the summer of last year.

The report pointed out that the shares sold below the $6 billion to $8 billion estimate of the company’s worth in January 2022 dropped following the fall of Terra Luna projects and FTX.

At the bankruptcy court hearing on Monday, BlockFi attorney Joshua Sussberg said that the settlement satisfied allegations by the investor, known only as ‘Counterparty A,’ who had bought equity shares as part of executive pay packages.

Notably, BlockFi filed for bankruptcy in November, shortly after the collapse of the crypto exchange FTX. BlockFi lawyers told the court yesterday that the company executives have not withdrawn any of their crypto locked up on the platform since October 2022.

Lawyer Sussberg said:

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.

Additionally, US bankruptcy Judge Michael Kaplan rejected BlockFi’s request for the return of shares of Robinhood Markets that FTX had guaranteed to BlockFi as security for a loan.

Kaplan said:

At this juncture, it’s clear that this court is not in a position to enter any turnover order of any type.

The judge clarified that the government holds the shares due to a seizure warrant and is not a party to the pending adversary proceeding.