BlockFI Claims To Have Refunded Investors $15 Million In Order To Resolve The Crypto Crisis

(Reuters) - BlockFi Inc executives gave an investor $15 million to resolve a potential lawsuit over the company's plummeting stock worth in summer 2022, the company's counsel said Monday in bankruptcy court.

According to BlockFi attorney Joshua Sussberg, the settlement settled allegations by the investor, named only as “Counterparty A,” who acquired equity shares provided as part of executive pay packages.

The shares were offered at a discount to the company's January 2022 worth of $6 billion to $8 billion, but their value fell during the summer when two cryptocurrencies went bankrupt, causing widespread mayhem in crypto markets.

According to Sussberg, the BlockFi investor threatened to sue, claiming that BlockFi and its staff should have been more clear about bitcoin market contagion risks.

BlockFi thought the investor's accusations were “specious,” but it struck a private deal on Aug. 23 in which BlockFi executives reimbursed the investor $15 million, according to Sussberg.

The settlement's highest payment was made by BlockFi creator Zac Prince, who refunded $6.144 million.

An emergency loan issued by crypto exchange FTX on July 1 revealed BlockFi's significant decrease in value. That financing allowed FTX the option to purchase BlockFi for $240 million, thus establishing a ceiling on existing ownership.

BlockFi lay off 20% of its staff after the company's worth dropped. BlockFi will shortly seek court permission for an employee incentive package designed to deter surviving workers from departing during the business's bankruptcy and to reimburse employees who previously earned company shares as part of their salary, according to Sussberg.

According to Sussberg, Prince's ownership investment in FTX lost $412.82 million in value, causing him to lose out on a scheduled $600,000 incentive payout. BlockFi's next staff retention strategy will exclude Prince and other execs.

BlockFi, situated in New Jersey, filed into bankruptcy on Nov. 28, a direct result of FTX's demise weeks earlier. Sam Bankman-Fried, the creator of FTX, has recently been arrested on fraud allegations and has pled not guilty.

BlockFi and FTX are at odds over $465 million in shares of online broker Robinhood Markets Inc (HOOD.O) that BlockFi claimed as security for an unpaid obligation owing to them through FTX subsidiary Alameda Research. The case was muddled further when the United States Department of Justice confiscated the shares, and a BlockFi attorney claimed Monday that the DOJ was in the process of taking funds owned by two or three BlockFi clients in Washington state.

Download and install the WikiFX App from the download link below to stay updated on the latest news, even on the go.

Download link: https://www.wikifx.com/en/download.html