In a legal battle over repayments, BlockFi has challenged FTX and Three Arrows Capital. The bankrupt crypto lender accused FTX and Three Arrows Capital of victimizing the company and claimed that they are not entitled to the $5 billion they are seeking to recover. The ongoing dispute has significant implications for the separate bankruptcy proceedings of BlockFi, FTX, and Three Arrows, potentially affecting the repayment amounts to their respective creditors. BlockFi has expressed concerns that the litigation with FTX, Three Arrows, and other crypto firms could impact its customers’ repayment by up to $1 billion. FTX, on the other hand, states that its primary objective is to recover loan repayments and collateral that were pledged to BlockFi before the firm declared bankruptcy.
BlockFi Challenges FTX in Legal Dispute Over Repayments
Background of the Legal Dispute
The legal dispute between BlockFi, FTX, and Three Arrows Capital has caught the attention of the cryptocurrency industry. BlockFi, a bankrupt crypto lender, is currently battling against FTX and Three Arrows Capital’s attempts to recover billions of dollars that were transacted between the firms before they collapsed last year.
BlockFi’s Accusations against FTX and Three Arrows Capital
BlockFi has accused FTX and Three Arrows Capital of victimizing the company and claimed that they are not entitled to the $5 billion they are seeking to recover. BlockFi argues that to prevent further injustice to the creditors of BlockFi’s estates, the court should disallow the FTX claims under the doctrine of unclean hands.
Implications for Bankruptcy Proceedings
The ongoing legal dispute has significant implications for the separate bankruptcy proceedings of BlockFi, FTX, and Three Arrows. This dispute could potentially affect the repayment amounts to their respective creditors. BlockFi, which is currently in the process of liquidation, has expressed concerns that the litigation with FTX, Three Arrows, and other crypto firms could impact its customers’ repayment by up to $1 billion.
Concerns about Customer Repayments
Customers of BlockFi are naturally concerned about the potential impact of this legal dispute on their repayments. With BlockFi’s claims that the litigation could affect customer repayments by up to $1 billion, customers are left uncertain about the security of their funds.
This image is property of s3.cointelegraph.com.
FTX’s Defense and Objective
FTX has stated that its primary objective in this legal dispute is to recover loan repayments and collateral that were pledged to BlockFi before the firm declared bankruptcy in November. FTX is seeking the recovery of $90 million in withdrawals made by BlockFi from FTX.com, as well as $400 million in loan repayments made by its trading firm, Alameda Research, among other preferential payments.
Bankruptcy Law and the Unwinding of Transactions
Under bankruptcy law, failed companies have the ability to unwind transactions that favor specific creditors at the expense of others, especially in the months leading up to filing for Chapter 11. This ability to unwind transactions plays a significant role in determining the outcome of the legal dispute between BlockFi, FTX, and Three Arrows Capital.
FTX’s Claims for Recovery
FTX is seeking the recovery of $90 million in withdrawals made by BlockFi from FTX.com. In addition, FTX is also seeking the recovery of $400 million in loan repayments made by its trading firm, Alameda Research, as well as other preferential payments made by BlockFi. These claims for recovery are at the center of the legal dispute.
BlockFi’s Counterargument
BlockFi has counterargued FTX’s claims, stating that the $400 million in question was not a standard loan agreement. BlockFi claims that it was an unsecured, 5-year term with below-market interest rates and repayments that weren’t due until the firm would supposedly mature. BlockFi argues that FTX’s investment was a “gamble” that BlockFi creditors shouldn’t be liable for.
Three Arrows Capital’s Claims against BlockFi
Three Arrows Capital has also entered the legal dispute, claiming that BlockFi owes them more than $220 million, making Three Arrows one of the largest creditors. Three Arrows sought Chapter 15 protection, a type of bankruptcy that safeguards the US assets of international firms. They argue that BlockFi’s efforts to reduce their claims may violate the bankruptcy pause granted to Three Arrows.
Chapter 15 Protection and Violation of Bankruptcy Pause
Chapter 15 protection is a crucial aspect of Three Arrows Capital’s claims against BlockFi. This protection is designed to safeguard the US assets of international firms, and Three Arrows argues that BlockFi’s efforts to reduce their claims may violate this protection. The violation of the bankruptcy pause adds another layer of complexity to the legal dispute.
BlockFi Initiates Withdrawals for Eligible US Customers
In compliance with a court order issued by the US Bankruptcy Court for the District of New Jersey, BlockFi has initiated withdrawals for eligible US customers. This move comes after a court granted BlockFi legal permission to initiate withdrawals after a nine-month break on August 16. BlockFi is taking steps to address customer concerns and comply with legal mandates.
In conclusion, the legal dispute between BlockFi, FTX, and Three Arrows Capital has significant implications for the cryptocurrency industry. BlockFi’s accusations against FTX and Three Arrows, concerns about customer repayments, and the opposing claims for recovery from both parties have added complexity to the bankruptcy proceedings. The outcome of this legal dispute will have far-reaching consequences for all parties involved and could reshape the landscape of the cryptocurrency industry.
