The automatic stop on legal actions between bankrupt cryptocurrency companies FTX and BlockFi has been lifted by an order from a U.S. judge, allowing the parties to begin claims negotiations.A lender named BlockFi declared bankruptcy at the end of November of last year, partly as a result of the fallout from the abrupt demise of FTX earlier in the month.That set off the automatic stay, which put an end to their conversation.BlockFi was owed an additional $671 million by FTX’s sister business, Alameda Research, and had an estimated $355 million frozen on the cryptocurrency exchange’s platform.
A Nov. 13 court ruling by U.S. bankruptcy judge Michael Kaplan allows FTX debtors to make “arguments, defenses, counterclaims, setoffs, or otherwise… with respect to the BlockFi claims in the FTX bankruptcy proceeding,” modifying the stay.
After a five-week trial, Sam Bankman-Fried, the founder of the now-bankrupt FTX, was found guilty on all seven counts of cheating his lenders and customers at the beginning of this month.During the trial, BlockFi CEO Zac Prince testified against Bankman-Fried, explaining how the company’s engagement with FTX and Alameda caused it to lose “a little over a billion dollars,” forcing it to file for bankruptcy at that time.
The creditors of BlockFi approved a bankruptcy restructuring plan in late September, which theoretically would have allowed the company to recoup the assets it had lost to FTX and the assets it had lost when the cryptocurrency hedge fund Three Arrows Capital failed in the summer of 2022.