Bankrupt BlockFi Contests Recovery Claims by FTX and Three Arrows Capital
BlockFi is contesting efforts by FTX and Three Arrows Capital to recover millions of dollars owed to their creditors. BlockFi argues that its clients and other legitimate creditors should not be disadvantaged because of the alleged misappropriation of $5 billion by FTX. BlockFi filed a motion in a New Jersey bankruptcy court to disallow FTX’s claims under the doctrine of unclean hands.
Key Points:
- BlockFi insists that FTX’s recovery claims would harm its clients and other creditors.
- FTX provided $400 million to BlockFi and bought BlockFi equity, but BlockFi argues that it was an unsecured, below-market interest rate agreement.
- BlockFi accuses FTX of fraudulent actions and asserts that its creditors should not be responsible for FTX’s failed bet.
- BlockFi also mentions fraudulent borrowings from the collapsed crypto hedge fund Three Arrows, disqualifying potential repayment.
- The litigation between BlockFi, FTX, 3AC, and others could cost BlockFi up to $1 billion and influence the amount owed to its creditors.
BlockFi’s bankruptcy case, along with the legal battles with FTX and Three Arrows Capital, could have significant financial implications for BlockFi and its creditors. The outcome of these disputes will determine the distribution of funds to BlockFi’s creditors.
Hot Take:
BlockFi is taking a strong stance against FTX and Three Arrows Capital, arguing that its creditors should not bear the consequences of their alleged fraudulent actions. As the legal battles unfold, the final outcome will have far-reaching implications for the crypto lending industry and how responsibilities are assigned in similar cases.
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