It’s considered a bearish sign when a company’s executive team starts selling its equity stock. Recently, an investor identified as “Counterparty A,” according to court documents, bought a portion of the equity stock that BlockFi leaders received as part of their executive compensation packages – and quickly regretted doing so.
The investor threatened to sue BlockFi executives, contending that they should have been more forthcoming about the “contagion risks in the cryptocurrency market,” according to BlockFi attorney Joshua Sussberg. BlockFi called the claims specious. However, the company reached a $15 million agreement to resolve the suit in August 2022. BlockFi founder Zac Prince paid the most toward the settlement, at $6.14 million.
The shares were purchased at a discount based on BlockFi’s January 2022 valuation of $6 billion to $8 billion. However, that wouldn’t remain the case for long, as BlockFi was the first casualty of the FTX FTT/USD debacle. FTX started to unravel on Nov. 2 when it was discovered that quant trading firm Alameda Research held a $5 billion value position in FTT tokens, even though both companies were run by Sam Bankman-Fried.
On Nov. 11, BlockFi filed for Chapter 11 bankruptcy protection (the same day as the FTX bankruptcy filing). BlockFi claimed it had liabilities and assets of $1 billion to $10 billion and over 100,000 creditors, according to its filing.
On July 1 FTX provided an "emergency loan" to BlockFi that allowed FTX the option to buy BlockFi for $240 million. This setting of an upper value for BlockFi, combined with the upcoming FTX collapse, would have a deleterious impact on BlockFi.
BlockFi is seeking approval to pay employee bonus packages to keep employees from fleeing during corporate restructuring. Prince and the executive team are not part of the employee bonus plan.
BlockFi and FTX have been battling over $465 million in Robinhood Markets Inc HOOD shares that belonged to Bankman-Fried. The Department of Justice (DOJ) is in the process of seizing the same Robinhood shares.
Cover image by Keli Black from Pixabay
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