A New Jersey court has given preliminary approval for a $13 million settlement between the bankrupt BlockFi and its investors who alleged the company misled them regarding its interest accounts.
Settlement Details
According to the ruling by U.S. District Judge Claire Cecchi, BlockFi's insurers must deposit over $13 million into an escrow account within 30 days. The settlement arises from a class-action lawsuit filed in 2023 and covers approximately 89,000 users who held interest accounts from March 2019 until BlockFi's collapse in November 2022.
The Lawsuit and Allegations
The lawsuit, led by investor Trey Greene, alleged that BlockFi sold unregistered securities while making 'a steady stream of misrepresentations and material omissions' under then-CEO Zac Prince and COO Flori Marquez. Court documents also claimed that Prince ignored his risk team's warnings about lending assets to Alameda Research, linked to FTX.
Bankruptcy Proceedings
The class-action settlement runs concurrently with BlockFi's Chapter 11 bankruptcy process. In September 2023, a bankruptcy court approved a repayment plan for over 10,000 creditors. BlockFi also reached an $875 million settlement with FTX and Alameda Research to resolve competing claims. If Judge Cecchi grants final approval in December, payouts from the $13 million fund will be distributed to eligible BlockFi account holders.
BlockFi's case underscores the ongoing fallout from the 2022 crypto market crash, which exposed weaknesses in risk management and compliance across several formerly prominent firms.
