BlockFi Inc.’s past business with FTX appeared legitimate and gave management no reason to worry about lending to Sam Bankman-Fried’s crypto platform before it melted down amid allegations of fraud last year, according to a probe by independent BlockFi directors and its lawyers, Bloomberg News reported. Findings of the seven month investigation were made public Monday in New Jersey bankruptcy court to support a BlockFi settlement that would resolve potential legal claims related to the crypto lenders’ collapse against co-founders Zac Prince and Flori Marquez, as well as other company officers. Management, in exchange, has agreed to assist company lawyers in potentially lucrative actions against firms they blame for BlockFi’s collapse including FTX and failed crypto hedge-fund Three Arrows Capital. BlockFi management will serve as key witnesses in litigation involving FTX and Three Arrows, the outcome of which could result in $1 billion in value for creditors, the crypto lender said. Prince, Marquez and the other executives have also agreed to waive or reduce recoveries of their personal digital assets on BlockFi’s platform and contribute $2.2 million in cash to the company, according to court documents. The settlement must be approved by a judge.
