BlockFi Approved for $10 Million Staff Retention Bonus in Bankruptcy Proceedings

BlockFi, a crypto lender, has been granted permission by a New Jersey bankruptcy court to pay its staff up to $10 million in a retention program. The court filing, dated January 27th, revealed that the payments would be made in three instalments over a 12-month period. 

The bonus will be split into two tiers, with 42.5% of the base salary being paid in the first tier and 9% in the second. The number of employees eligible for the bonus and the qualifications for each tier was not specified in the filing.

BlockFi had previously argued that the bonus was necessary to retain its staff during the bankruptcy proceedings. However, unsecured creditors argued that the proposed bonus was “broader and more expensive” than in other crypto cases. Other bankrupt crypto firms, such as Celsius and Voyager, have also requested retention programs for their employees.

BlockFi had $1.2 billion invested in the failed crypto companies FTX and Alameda Research, according to recent financial documents. The lender had $415.9 million in assets on FTX and $831.3 million in loans to Alameda. Additionally, BlockFi had 662,427 users, with over 70% having balances less than $1,000.

Furthermore, it was reported by Bloomberg on January 23rd that BlockFi planned to sell $160 million in loans collateralized by 68,000 mining machines. The lender’s business, along with other miners, has been hit hard by Bitcoin’s record-low decline in 2022. 

Additionally, the lender claims to have taken possession of Sam Bankman-Fried’s Robinhood shares as collateral for a loan given to Alameda before they were seized by US authorities.

BlockFi & Impact of Retention Bonus on Bankruptcy Proceedings

Retention bonuses offered to key employees during bankruptcy proceedings are common. 

However, the extent and cost of these bonuses can be a point of contention between the company and its creditors. In BlockFi’s case, the proposed bonus has been criticized as being more expensive than in other crypto cases.

The retention bonus will undoubtedly have an impact on the bankruptcy proceedings. Retaining key staff through bonus may aid in company’s restructuring. 

However, if the bonus is seen as excessive by the court, it could lead to further disputes between the company and its creditors. It remains to be seen how the retention bonus will ultimately impact the outcome of the bankruptcy proceedings for BlockFi.

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