The Potential Claims Against Digital Currency Group and BlockFi
A July 7 report from Teneo, the liquidator of Three Arrows Capital (3AC), suggests that there may be potential claims worth about $1.2 billion against Digital Currency Group (DCG) and crypto lender BlockFi. These claims seek to recover payments made by 3AC before the liquidation process began. The report refers to over $1 billion of “prospective claims” against DCG and its Genesis lending subsidiary, including preference claims and claims related to loan and security documentation issues. Additionally, the report mentions over $220 million of “preferential payments” made to BlockFi. It is unclear at this time if Teneo plans to pursue these funds.
Key points:
– Teneo, the liquidator of 3AC, may attempt to reclaim approximately $1.2 billion from DCG and BlockFi.
– The claims consist of both preference claims and claims arising from loan and security documentation issues.
– BlockFi received over $220 million in preferential payments.
– Teneo has not disclosed its plans regarding the recovery of funds.
– DCG, the parent company of CoinDesk, has not commented on the matter.
Insolvency Twilight Zone and Preference Claims
During the insolvency twilight zone, which followed the collapse of the Terra Luna project in 2022, 3AC made transactions that may have put certain creditors in a better position than others. These transactions are known as preference claims and could have legal implications if 3AC was aware of their impact on other creditors. The report suggests that the potential claims against DCG and BlockFi are linked to these preference claims made by 3AC.
Hot Take:
The potential claims against Digital Currency Group and BlockFi highlight the complex nature of liquidation processes in the cryptocurrency industry. As investors and lenders navigate the insolvency twilight zone, it becomes crucial to ensure fair treatment of all creditors. The outcome of these potential claims could set important precedents for future liquidations and further shape the regulatory landscape of the crypto market.
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