#1◆ BlockFi January 9, 2023 In re BlockFi Inc., No. 22-19361 (MBK) United States Bankruptcy Court for the District of New Jersey Judge Michael B. Kaplan#2Roadmap I. II. Progress Since the First Day Hearing Preview of SOFAS and Schedules III. Proposed Agenda BlockFi 2#3BlockFi 10 Progress Since the First Day Hearing 3#4BlockFi Initiated Sale Process Shortly after the First Day Hearing, the Debtors commenced a marketing and sale process, reaching out to 106 domestic and international potential buyers for some or all of the business. The Debtors will file a motion seeking approval of bidding procedures at the January 30, 2023 omnibus hearing. Shortly following First Day Hearing December 19, 2022 December 19-30, 2022 December 29, 2022- January 4, 2023 4#5BlockFi Filed Wallet Withdrawal Motion As represented at the First Day Hearing, the Wallet Withdrawal Motion was filed and will be heard as soon as possible in coordination with the Committee. The Debtors seek to do right by their clients: Honor client withdrawals from their Wallet Accounts as of the Platform Pause Time Stamp, Update the User Interface to reflect proper accounting of digital assets in Wallet Accounts as of the Platform Pause Time Stamp, and Conduct ordinary course reconciliation of client accounts. Shortly following First Day Hearing December 19, 2022 December 19-30, 2022 Buy/Soll Balance $23,641.35 Balances Bitcoin BTC Basic Attention Token Ethoroum ETH Uniswap UNI Litecoin LITE Wallet Cheinlink LINK Hone Fund Credit Card Withdraw $4.52.09 3.99833 $15,500.02 012101679 $3,248.19 $1,023.18 3.92894729 $2,018.01 329002770 $1,102.92 45.9801013 8 Settings December 29, 2022- January 4, 2023 5#6BlockFi "Second Day" Motions & Retention Applications The Debtors filed a suite of "second day motions" and professional retention applications: Second Day Motions Rejection Procedures Motion [Docket No. 122] Motion for Administrative Fee Order [Docket No. 123] Ordinary Course Professionals Motion [Docket No. 124] Loan Procedures Motion [Docket No. 125] Motion to Seal Names of M&A Counterparties [Docket No. 127] Shortly following First Day Hearing December 19, 2022 Retention Applications KIRKLAND & ELLIS LLP HAYNES BOONE Cole Schotz P.C. BRG KROLL MOELIS & COMPANY December 19-30, 2022 December 29, 2022- January 4, 2023 6#7BlockFi The U.S. Trustee Appoints the "Clients' Committee" Case 22-19361-MBK Doc 130 Fled 12/21/22 Exeed 12/21/22 22 44 18 Desc Main Document Page 2 of 2 UNITED STATES DEPARTMENT OF JUSTICE ES TRUSTEE 7 OFFICE OF THE UNITED STATES ANDREW R. VARA UNITED STATES TRUSTEE, REGIONS & 9 Maha R. chart, Esq. Jeffrey M. Spoder. Exa Laura Bilde One Newark Center, Suite 1998 New 2002 Telephone: 1973) 645-3014 Fax: (973) 643-5993 Email: lettory pack go en hielskie udogo UNITED STATES BANKRUPTCY COURT DISTRICT DE NEW JERSEY BLOCKEY INC., et of Dehors Chapter 11 Case No. 22-19361(K) ity Administered CREDITORS NOTICE OF APPOINTMENT OF OFFICIAL COMMITTEE OF UNSECURED Purvat Selen 110XT) of the Bankruptcy Code, the United Sue Truse herdry appoints eive December 21, 2022. the below listed creditors to the Official Commitice of Unsecured Chain above-cupioned we 1. Niche Owen Ganden, a vida coller, Cat Drummer, E349 Cenay Park Eat, Sue (700, La Angeles, CA 9006 Telephone: (319)-312-4149 Email: goda.com. 2. Envey 1. Grossman, individual creditor 3. John & Saves, an individual creditor hers in these Chapter 15, along with the lare fondig of cher's are in. Trading C&C (2487) Landing 11 (017), Block Wall LC328) Bi Ves LLC 993 Bali 14 (Nick Pro LLC (2423), ck Servis wwwwww vie 15 And LC154) heic the Debtes service stress in 291 Montgomery Strees. Sute 23. NO ocks Shortly following First Day Hearing On December 21, 2022, the U.S. Trustee appointed the Official Committee of Unsecured Creditors, which is comprised of 9 individual clients. December 19, 2022 December 19-30, 2022 December 29, 2022- January 4, 2023 7#8BlockFi Committee Selects Professionals brownrudnick M3 Gelementus PARTNERS The Debtors and the Committee met on January 6, 2023. Shortly following First Day Hearing December 19, 2022 December 19-30, 2022 December 29, 2022- January 4, 2023 8#9BlockFi Preview of SOFAS and Schedules 9#1012B 10B SB 6B 28 January 2022 - November 2022 by Jan 2022 2/14 SEC settlement Mar 2022 5/10 Terra/LUNA de-peg May 2022 6/12 Celsius pauses withdrawals 7/1 BlockFi signs FTX Loan and Option Agmt Jul 2022 Sep 2022 Lendable Assets 11/8 FTX liquidity crunch reported Nov 2022 BlockFi 11/10 FTX files for bankruptcy 10#11Preview of SOFAS and Schedules Similar to many BlockFi clients, BlockFi's management team deployed their personal assets on the platform, to trade, earn interest, and store different cryptocurrencies under the same terms of service as clients. The below sets forth the balance (in U.S. Dollar equivalent) in cryptocurrency on the BlockFi platform for the members of the BlockFi management team who had BlockFiaccounts at the end of each month in 2022 before the Petition Date: (¹) Name BTC price A. Cheela M. Crowell A. Grigoryan A. Healy T. Lauro R. Loban F. Marquez Z. Prince A. Tam 1/31/22 $38,480 $329k $11k $10k $254k $279k $245k $154k $9213k $222k 2/28/22 $43,169 $338k $12k $10k $407k $309k $273k $165k $12490k $309k 3/31/22 $45,514 $346k $13k $10k $409k $330k $290k $170k $13151k $323k 4/30/22 $37,640 $333k $11k $10k $410k $276k $241k $154k $3037k(2) $227k 5/31/22 $31,798 $303k $10k $10k $412k $227k $74k $142k $2577k $15k 6/30/22 $19,921 $291k $9k $9k $1k $146k $47k $117k $2124K $13k 7/31/22 $23,302 $297k $9k $10k $1k $177k $60k $125k $2421k $14k 8/31/22 $20,050 $294k $9k $10k $1k $157k $54k $118k $1366k $14k 9/30/22 BlockFi $19,423 $295k $9k $10K $1k $150k $50k $117k $1704K $14k 10/31/22 $20,496 $298k $9k $10k $1k $161k $55k $120k $1833k $14k 11/21/22 $15,779 $292k $8k $9k $1k $125k $43k $109k $1392k $13K No member of the BlockFi management team withdrew any cryptocurrency from BlockFi's platform after October 14, 2022, and no member of BlockFi's management team made a withdrawal greater than 0.2 BTC in value at any time after August 17, 2022. (1) These figures combine balances on BlockFi's retail and institutional platforms (as applicable).. (2) In addition to a material drop in the price of BTC and other cryptocurrency during 2022, which had an impact on these figures for each member of management, Mr. Prince made 11 a significant withdrawal in April 2022 from deposits he had previously made on the BlockFi platform in order to pay U.S. federal and state taxes.#12Preview of SOFAS and Schedules (Cont'd) For context, in 2022, BlockFi completed a total of $7.7 billion in retail withdrawals, and the management team's withdrawals represent 0.15% of that total volume: Time Period Retail Withdrawals 1/1/2022-Platform Pause $7.7 billion 6/1/2022-Platform Pause $3.3 billion BlockFi 12#13"Crypto-winter" and FTX Industry headwinds in the Summer of 2022 caused contagion across the sector and led to material withdrawals from platforms industry-wide. To protect clients' funds, BlockFi executed a transaction in which FTX committed to loan $400 million in cryptocurrency on a junior basis to BlockFi's obligations to its clients, enabling BlockFi to process billions of dollars in clients' requested withdrawals and other transactions between June and November 2022. BlockFi FTX Strikes Deal With Option to Buy Crypto Lender BlockFi... The deal also includes a $400 million credit facility for Block Fi... The Wall Street Journal - July 1, 2022 13#14Impact of the FTX Transaction on BlockFi's Executives, Employees, and Shareholders O BlockFi The FTX transaction stabilized BlockFi and protected clients. But while the structure of the transaction secured liquidity for BlockFi's clients, it led to BlockFi's executives and employees losing their own equity value. BlockFi also reorganized its workforce, reducing headcount by over 20% to attempt to further protect client value and set a course to return to profitability. At the same time, it became necessary and critical to implement a go-forward compensation structure to retain business-critical capabilities needed to effectuate the FTX transaction. Thus, in July 2022, BlockFi's then-board of directors approved a multi-pronged strategy.. 14#15Multi-pronged Strategy 1 First, several members of BlockFi's management team had paid out of pocket for, or otherwise financed, shares or options rendered worthless by the FTX transaction. BlockFi funded one-time payments to effectively return the funds it had received and make certain employees whole. W 2 Second, the board approved a retention program offering key employees the opportunity to earn cash payments of up to 50% of their base salary if: (a) they stayed at BlockFi through February 2023; and (b) BlockFi met certain company-wide goals. The retention program, however, was discontinued upon BlockFi's chapter 11 filing, and no payments were made (or will be made) to insiders thereunder. BlockFi 3 Third, BlockFi historically timed compensation raises with material capital markets activity and fundraising. 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 to ensure business-critical knowledge and capabilities were maintained. 15#16(3) Insider Base Salary Adjustments Following FTX Transaction 2023 Planned Retention Payment That Will Not Be Made Salary Change Following FTX Transaction Name C. Allmon A. Cheela M. Crowell A. Grigoryan A. Healy R. Loban F. Marquez J. Mayers Y. Mushkin B. Oliver Z. Prince D. Spack A. Tam Equity Lost in FTX Transaction (3) $13.13M $19.93M $5.55M $11.25M $19.5M $5.25M $156.43M $64.5M $11.25M $18.75M $187.5k $281k $187.5k $250k $262.5k $200k $250k $281.25k $275k $250k $600k $171.9k $187.5k $300k-$375k $282k-$353.1k $270k-$337.5k $350k-$437.5k $420k-$525k $300k-$375k $225k-$500K $350k-$562.5k $440k-$550k $400-$500k $250k-$400K $275k-$343.8k $300k-$375k Post-FTX Salary Change For Promotion or Other Reason (if Applicable) N/A $562k $375k $500k N/A $400k N/A N/A N/A N/A N/A N/A N/A BlockFi $412.82M $34.5M $34.5M The Debtors intend to obtain Court approval of a KERP, which excludes insiders. Amounts are measured against the implied valuation of BlockFi-from the issuance of Series E preferred stock to investors in July and August 2021. 16#17BlockFi Jan 2018: BlockFi starts lending Feb 2018: BlockFi seed round of funding 2018 July 2018: BlockFi $50M in funding from Galaxy Jan-Feb 2020: Series B Preferred Stock July-Aug 2019: Series A Preferred Stock 2019 Aug-Sept 2020: Series C Preferred Stock at $450M valuation Mar-May 2021: Series D Preferred Stock at $3B valuation July-Aug 2021: Series E Preferred Stock at $3.8B valuation 2020 2021 Nov 11, 2022: FTX bankruptcy filing Nov 10, 2022: BlockFi limits customer withdrawals Nov 2, 2022: FTX/Alameda financial data leaked October 27, 2022: Core Scientific announces default Feb 14, 2022: SEC Settlement July 13, 2022: Celsius files chapter 11 July 5, 2022: Voyager freezes platform/files chapter 11 June 14, 2022: 3AC collapse June 12, 2022: Celsius freezes platform ~May 10, 2022: Luna collapses 2022 17#18BlockFi Litigation Settlement Chronology Jan 2018: BlockFi starts lending Feb 2018: BlockFi seed round of funding 2018 July 2018: BlockFi $50M in funding from Galaxy Jan-Feb 2020: Series B Preferred Stock July-Aug 2019: Series A Preferred Stock 2019 Aug-Sept 2020: Series C Preferred Stock at $450M valuation Mar-May 2021: Series D Preferred Stock at $3B valuation July-Aug 2021: Series E Preferred Stock at $3.8B valuation 2020 2021 Nov 11, 2022: FTX bankruptcy filing Nov 10, 2022: BlockFi limits customer withdrawals Nov 2, 2022: FTX/Alameda financial data leaked October 27, 2022: Core Scientific announces default Feb 14, 2022: SEC Settlement July 13, 2022: Celsius files chapter 11 July 5, 2022: Voyager freezes platform/files chapter 11 June 14, 2022: 3AC collapse June 12, 2022: Celsius freezes platform ~May 10, 2022: Luna collapses 2022 18#19BlockFi Litigation Settlement Chronology First PSC Agreements Jan 2018: BlockFi starts lending Nov-Dec 2021 Feb 2018: BlockFi seed round of funding 2018 July 2018: BlockFi $50M in funding from Galaxy Jan-Feb 2020: Series B Preferred Stock July-Aug 2019: Series A Preferred Stock 2019 Aug-Sept 2020: Series C Preferred Stock at $450M valuation Mar-May 2021: Series D Preferred Stock at $3B valuation July-Aug 2021: Series E Preferred Stock at $3.8B valuation 2020 Nov-Dec 2021: First PSC Agreements 2021 Nov 11, 2022: FTX bankruptcy filing Nov 10, 2022: BlockFi limits customer withdrawals Nov 2, 2022: FTX/Alameda financial data leaked October 27, 2022: Core Scientific announces default Feb 14, 2022: SEC Settlement July 13, 2022: Celsius files chapter 11 July 5, 2022: Voyager freezes platform/files chapter 11 June 14, 2022: 3AC collapse June 12, 2022: Celsius freezes platform ~May 10, 2022: Luna collapses 2022 19#20BlockFi Litigation Settlement Chronology First PSC Agreements $6-$8 Billion Third Party Indicative Valuation Jan 2018: BlockFi starts lending Nov-Dec 2021 January 2022 Feb 2018: BlockFi seed round of funding 2018 July 2018: BlockFi $50M in funding from Galaxy Jan-Feb 2020: Series B Preferred Stock July-Aug 2019: Series A Preferred Stock 2019 Aug-Sept 2020: Series C Preferred Stock at $450M valuation Mar-May 2021: Series D Preferred Stock at $3B valuation July-Aug 2021: Series E Preferred Stock at $3.8B valuation 2020 Jan 2022: $6-$8 Billion Third Party Indicative Valuation Nov-Dec 2021: First PSC Agreements 2021 Nov 11, 2022: FTX bankruptcy filing Nov 10, 2022: BlockFi limits customer withdrawals Nov 2, 2022: FTX/Alameda financial data leaked October 27, 2022: Core Scientific announces default Feb 14, 2022: SEC Settlement July 13, 2022: Celsius files chapter 11 July 5, 2022: Voyager freezes platform/files chapter 11 June 14, 2022: 3AC collapse June 12, 2022: Celsius freezes platform ~May 10, 2022: Luna collapses 2022 20#21BlockFi Litigation Settlement Chronology First PSC Agreements $6-$8 Billion Third Party Indicative Valuation Second PSC Agreements Jan 2018: BlockFi starts lending Nov-Dec 2021 January 2022 March-April 2022 Feb 2018: BlockFi seed round of funding 2018 July 2018: BlockFi $50M in funding from Galaxy Jan-Feb 2020: Series B Preferred Stock July-Aug 2019: Series A Preferred Stock 2019 Aug-Sept 2020: Series C Preferred Stock at $450M valuation Mar-May 2021: Series D Preferred Stock at $3B valuation July-Aug 2021: Series E Preferred Stock at $3.8B valuation 2020 Jan 2022: $6-$8 Billion Third Party Indicative Valuation Nov-Dec 2021: First PSC Agreements 2021 Nov 11, 2022: FTX bankruptcy filing Nov 10, 2022: BlockFi limits customer withdrawals Nov 2, 2022: FTX/Alameda financial data leaked October 27, 2022: Core Scientific announces default Feb 14, 2022: SEC Settlement July 13, 2022: Celsius files chapter 11 July 5, 2022: Voyager freezes platform/files chapter 11 June 14, 2022: 3AC collapse June 12, 2022: Celsius freezes platform Mar and Apr 2022: Second PSC Agreements ~May 10, 2022: Luna collapses 2022 21#22BlockFi Litigation Settlement Chronology First PSC Agreements $6-$8 Billion Third Party Indicative Valuation Second PSC Agreements Counterparty Threats Against BlockFi Jan 2018: BlockFi starts lending Nov-Dec 2021 January 2022 March-April 2022 June 2022 Feb 2018: BlockFi seed round of funding 2018 July 2018: BlockFi $50M in funding from Galaxy Jan-Feb 2020: Series B Preferred Stock July-Aug 2019: Series A Preferred Stock 2019 Aug-Sept 2020: Series C Preferred Stock at $450M valuation Mar-May 2021: Series D Preferred Stock at $3B valuation July-Aug 2021: Series E Preferred Stock at $3.8B valuation 2020 Jan 2022: $6-$8 Billion Third Party Indicative Valuation Nov-Dec 2021: First PSC Agreements 2021 Nov 11, 2022: FTX bankruptcy filing Nov 10, 2022: BlockFi limits customer withdrawals Nov 2, 2022: FTX/Alameda financial data leaked October 27, 2022: Core Scientific announces default Feb 14, 2022: SEC Settlement July 13, 2022: Celsius files chapter 11 July 5, 2022: Voyager freezes platform/files chapter 11 June, 2022: Counterparty Threats Against BlockFi June 14, 2022: 3AC collapse June 12, 2022: Celsius freezes platform Mar and ~May 10, 2022: Apr 2022: Second PSC Luna Agreements collapses 2022 22#23BlockFi Litigation Settlement Chronology First PSC Agreements $6-$8 Billion Third Party Indicative Valuation Second PSC Agreements Jan 2018: BlockFi starts lending Nov-Dec 2021 January 2022 March-April 2022 June 2022 July 1, 2022 Feb 2018: BlockFi seed round of funding 2018 July 2018: BlockFi $50M in funding from Galaxy Counterparty Threats Against BlockFi BlockFi / FTX "Rescue" Transaction Jan-Feb 2020: Series B Preferred Stock July-Aug 2019: Series A Preferred Stock 2019 Aug-Sept 2020: Series C Preferred Stock at $450M valuation Mar-May 2021: Series D Preferred Stock at $3B valuation July-Aug 2021: Series E Preferred Stock at $3.8B valuation 2020 Jan 2022: $6-$8 Billion Third Party Indicative Valuation Nov-Dec 2021: First PSC Agreements 2021 Nov 11, 2022: FTX bankruptcy filing Nov 10, 2022: BlockFi limits customer withdrawals Nov 2, 2022: FTX/Alameda financial data leaked October 27, 2022: Core Scientific announces default Feb 14, 2022: SEC Settlement July 13, 2022: Celsius files chapter 11 July 5, 2022: Voyager freezes platform/files chapter 11 July 1, 2022: BlockFi/FTX "rescue" transaction June, 2022: Counterparty Threats Against BlockFi June 14, 2022: 3AC collapse June 12, 2022: Celsius freezes platform Mar and Apr 2022: Second PSC Agreements ~May 10, 2022: Luna collapses 2022 23#24BlockFi Litigation Settlement Chronology First PSC Agreements $6-$8 Billion Third Party Indicative Valuation Second PSC Agreements Jan 2018: BlockFi starts lending Nov-Dec 2021 January 2022 March-April 2022 June 2022 July 1, 2022 August 23, 2022 Feb 2018: BlockFi seed round of funding 2018 July 2018: BlockFi $50M in funding from Galaxy Counterparty Threats Against BlockFi BlockFi / FTX "Rescue" Transaction Litigation Settlement Jan-Feb 2020: Series B Preferred Stock July-Aug 2019: Series A Preferred Stock 2019 Aug-Sept 2020: Series C Preferred Stock at $450M valuation Mar-May 2021: Series D Preferred Stock at $3B valuation July-Aug 2021: Series E Preferred Stock at $3.8B valuation 2020 Jan 2022: $6-$8 Billion Third Party Indicative Valuation Nov-Dec 2021: First PSC Agreements 2021 Nov 11, 2022: FTX bankruptcy filing Nov 10, 2022: BlockFi limits customer withdrawals Nov 2, 2022: FTX/Alameda financial data leaked October 27, 2022: Core Scientific announces default August 23, 2022: Litigation Settlement July 13, 2022: Celsius files chapter 11 July 5, 2022: Voyager freezes platform/files chapter 11 July 1, 2022: BlockFi/FTX "rescue" transaction Feb 14, 2022: SEC Settlement June, 2022: Counterparty Threats Against BlockFi June 14, 2022: 3AC collapse June 12, 2022: Celsius freezes platform Mar and Apr 2022: Second PSC Agreements ~May 10, 2022: Luna collapses 2022 24#25Litigation Settlement The threatened litigation was resolved in a confidential global settlement agreement and mutual release between the counterparty, BlockFi, and the executives. The settlement was brought to, and approved by, BlockFi Inc.'s board of directors. At the time of the settlement, as a result of the FTX transaction, FTX had an appointed observer to the board of directors. FTX's appointed board observer stressed the importance of this settlement-funded by FTX-to BlockFi and its clients' long-term best interests. BlockFi Due to the structure of the settlement, certain payments from BlockFi were routed through the executives and ultimately made to the counterparty. The payments also created tax liabilities for the executives even though they did not keep the funds. Instead, the individuals took the payments received from BlockFi and paid them to the counterparty pursuant to the settlement agreement, appropriate taxing authorities, or both. Name T. Lauro R. Loban F. Marquez Z. Prince D. Spack Total Litigation Settlement Litigation Settlement Payment Routed Through Insider $2,191,335 $462,545 $4,096,688 $6,144,785 $2,116,139 $15,011,492 25#26BlockFi Proposed Agenda 26#27Pleading Turnover Motion Gerro Lift Stay Objection Proposed Agenda Docket No. 2 (Adversary Proceeding) 173 BlockFi 27