New Jersey-based cryptocurrency lender BlockFi has requested the court to approve bonus paychecks for its management so the company can keep its talent throughout its bankruptcy proceedings, according to court documents filed on Monday.
“Despite an incredibly turbulent time in the digital asset industry, the opportunities for participants elsewhere have not dried up,” BlockFi Chief People Officer Megan Crowell said in a submitted declaration. “The war for talent remains active, and the participants have many opportunities inside and outside the cryptocurrency sector.”
Last week, Zodia Markets, a digital asset exchange based in London, hired the former BlockFi head of international’s institutional sales in Asia, Paul Howard, as its own head of sales.
BlockFi fired about two-thirds of its workforce and filed for Chapter 11 bankruptcy in late November following the collapse of the Bahamas-based cryptocurrency exchange, FTX.com. Sam Bankman-Fried, the founder of the exchange, had agreed to a deal to rescue BlockFi from earlier financial woes in July, before FTX filed for its own bankruptcy on Nov. 11.
The official committee of unsecured creditors has submitted objections to BlockFi’s retention plan, while the U.S. Trustee in the case objected to the lender’s decision to seal from the public details on the proposed payments and recipients.
A lawyer representing the official committee of unsecured creditors argued in the court filings that BlockFi is seeking permission to spend US$12.3 million for retention payments and up to another US$12 million in estate resources and fees.
“The Debtors’ proposed employee retention plan is broader and more expensive than other crypto cases,” wrote Mohsin Meghji, a lawyer for the creditors, comparing it to recent crypto lender bankruptcies such as that of Voyager and Celsius, both of which required smaller retention payments.
BlockFi’s plan costs US$99,000 per employee, which is around twice as much compared to the Voyager and Celsius cases, which were priced up to US$48,000, according to Meghji.
Legal representatives of BlockFi did not respond to Forkast’s request for comments.
According to court documents released on Jan. 9, BlockFi’s board of directors already increased the base salaries of “certain employees” after it received its deal from FTX in June, which lent the company a US$ 400 million line of credit and gave FTX the option to buy BlockFi. BlockFi said the pay increase helped “ensure business-critical knowledge and capabilities were maintained.”
The court filings also said BlockFi’s management team received one-time payments to return the funds BlockFi received in recent funding rounds to “certain employees” who lost equity in the FTX deal.
BlockFi added that an additional US$15 million was paid to an undisclosed investor to settle a threatened lawsuit over the company’s plummeting equity value.
An additional retention plan that offered key employees the opportunity to earn cash payments of up to 50% of their base salary fell through when BlockFi declared bankruptcy. The payments would have been contingent on employees staying through Feb. 2023 and BlockFi meeting certain company-wide goals.
According to the BlockFi bankruptcy filing, the crypto lender owes more than US$1 billion to its three biggest creditors. On Tuesday, court documents revealed that BlockFi had over US$1.2 billion of assets tied to cryptocurrency exchange FTX.com and its sister trading firm Alameda Research.