Equity Of BlockFi Executives Was Reduced By $800 Million Due To FTX Loan

CoinDesk reported that a loan from FTX last year resulted in the equity holdings of BlockFi executives being wiped out by $800 million. In exchange for this, the executives granted themselves pay increases of up to $500,000 each, as revealed by financial filings today. 

The statement of financial affairs for the crypto lender, includes thousands of pages of transactions that took place before its collapse in November, with a gross revenue of over $4 million for 2022. The bankruptcy of FTX in November had a significant impact on the industry and the filing details the effect of the June transaction on 13 of BlockFi’s top executives. 

The filing, made by BlockFi’s lawyers to the New Jersey Bankruptcy Court, states that “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.” 

For instance, Founder and CEO Zac Prince saw $413 million in equity value eliminated and was compensated by a salary hike between $250,000 and $400,000, while other executives were offered raises as high as $560,000.

According to financial filings, BlockFi’s lawyers have emphasized that, unlike in other cases such as Celsius, there were no panicked withdrawals by senior executives from the company prior to its collapse. The filing states that no member of the BlockFi management team withdrew any cryptocurrency from the platform after October 14th and that the management team represented only 0.15% of the $7.7 billion in retail withdrawals over the year. 

However, the filings do reveal significant withdrawals made by senior management, including $9 million taken out of the platform by CEO Zac Prince in April, which was stated in the filing as being used to pay U.S. federal and state taxes, and his withdrawal of just over $870,000 in August. 

Most transaction data has been anonymized and the court will consider next week whether to unseal creditor information. In a parallel hearing on Wednesday, a Delaware judge ruled that FTX customer names can remain confidential for three months.