US Bankruptcy Judge Orders Mediation in Crypto Legal Battle
A US bankruptcy judge has ordered crypto lender BlockFi and bankrupt hedge fund Three Arrows Capital (3AC) to enter mediation to resolve a $284 million claim made by 3AC. The mediation process, facilitated by a neutral third party, aims to reach a mutually agreeable settlement. If mediation fails, the case will proceed to trial in February 2024. The dispute revolves around “preferential payments” made by 3AC to BlockFi before declaring bankruptcy. Preferential payments are payments made to creditors prior to bankruptcy filings, allowing them to receive more than they would in a bankruptcy proceeding.
The Battle over Billions: BlockFi Resists FTX and Three Arrows Capital
Both BlockFi and FTX filed for Chapter 11 bankruptcy and are facing efforts by FTX and Three Arrows Capital to reclaim billions of dollars from pre-bankruptcy transactions. BlockFi contests the claims totaling over $483 million from FTX, arguing unfair targeting. BlockFi revealed losses exceeding $1 billion due to alleged fraud at FTX and urges the court to reject FTX’s claims. FTX’s objective is to recover loan repayments and collateral pledged before BlockFi’s bankruptcy filing.
Judge Approves Partial Repayment Plan Despite Opposition
The judge approved a partial repayment plan for BlockFi’s creditors despite opposition from FTX’s legal team. FTX lawyers view the deal as unfair to their creditors and aim to reject it in court. In a separate filing, BlockFi accuses Three Arrows Capital of using fraudulent means to borrow money and asserts that no outstanding debts are owed to them. However, 3AC insists that BlockFi owes them over $220 million.
Three Arrows Capital Invokes Bankruptcy Pause
Three Arrows Capital has invoked a bankruptcy pause under Chapter 15 protection to safeguard its assets in the US. They argue that BlockFi’s attempts to reduce their claims could infringe upon the protection granted by Chapter 15.
Hot Take: Resolving the Crypto Legal Battle
The US bankruptcy judge’s order for mediation between BlockFi and Three Arrows Capital is a significant step towards resolving the legal battle over the $284 million claim. Mediation provides an opportunity for both parties to reach a mutually agreeable settlement, avoiding a lengthy trial. However, if mediation fails, the case will proceed to trial in February 2024. The outcome of this dispute will have far-reaching implications for the creditors involved and could set precedents for future crypto-related bankruptcies. It remains to be seen whether a resolution can be reached through mediation or if the court will have to make a final determination on the matter.
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