FTX Loan Wiped Out $800M in BlockFi Executives’ Equity, Filings Reveal
A loan from FTX last year saw BlockFi executives’ equity holdings wiped out by a total $800 million – in exchange for which they granted themselves pay rises of as much as $500,000 each, filings show.
A statement of financial affairs for the crypto lender, filed Thursday, contains thousands of pages of transactions that took place in the run up to its collapse, with gross revenue of over $4 million for 2022 until its collapse on Nov. 28.
In the wake of the crypto winter last June, FTX offered BlockFi a $400 million loan. The bankruptcy of FTX on Nov. 11 sent a shockwave through the industry – and the filing details the impact of the June transaction on 13 of BlockFi’s top executives.
“The massive impact of the FTX transaction on management equity led BlockFi’s board of directors to, among other things, increase base salaries and make retention payments for those that remained in the interest of retaining business critical knowledge and capabilities,” said the filing, made by BlockFi lawyers to the New Jersey Bankruptcy Court.
Founder and chief executive Zac Prince, for example, saw $413 million in equity value eliminated, and was compensated by a salary hike of between $250,000 and $400,000, while others were offered a raise as much as $560,000, the filings said.
BlockFi lawyers have been at pains to stress that – unlike other cases such as Celsius – there were no last-minute panicky withdrawals by senior executives from the company before its collapse.
No member of the BlockFi management team withdrew any cryptocurrency from the platform after Oct. 14, the filing said, and the management team represented just 0.15% of the $7.7 billion in retail withdrawals over the year.
But the filings nonetheless reveal significant withdrawals made by senior management – including over $9 million taken out of the platform by Prince in April, which the filing said was to pay U.S. federal and state taxes, and his withdrawal of just over $870,000 in August.
Most transaction data is anonymized, with the court due to consider next week whether to unseal creditor information. In a parallel hearing Wednesday, a Delaware judge agreed FTX customer names can remain secret for three months.