- FTX is attempting to collect funds that BlockFi withdrew from FTX.com and others paid as interest by Alameda.
- BlockFi has however described FTX’s investment as a “gamble” that BlockFi creditors shouldn’t be held responsible for.
- Three Arrows Capital argue that BlockFi’s efforts to block their claims may violate the previously granted bankruptcy pause.
Bankrupt crypto lender BlockFi is attempting to thwart attempts by FTX and Three Arrows Capital (3AC) to collect billions of dollars exchanged between the companies before their demise last year. In a court filing made on Monday, BlockFi asserted that FTX and Three Arrows Capital are not entitled to the $5 billion they are requesting. BlockFi is accusing the two companies of victimising it.
In the filing, BlockFi wrote that the doctrine of “unclean hands” should be applied in order to prevent future unfairness to the creditors of BlockFi’s estates.
Effect on repayment to creditors
The ongoing tussle might have a substantial impact on how much is paid back to each creditor in the individual bankruptcy cases of BlockFi, FTX, and Three Arrows.
BlockFi, which is already in the liquidation process, has raised concerns that the legal battles with FTX, Three Arrows, and other crypto companies may have a $1 billion negative influence on the repayment of its clients.
FTX claims
In its defence, FTX has stated that its main goal is to recoup loan repayments and collateral that were given to BlockFi prior to the company’s bankruptcy filing in November 2022.
Along with other preferential payments, FTX is attempting to collect the $90 million that BlockFi withdrew from FTX.com and the $400 million that its trading company, Alameda Research, paid back in loan interest.
However, the $400 million, according to BlockFi, wasn’t covered by a typical loan arrangement. Instead, BlockFi claimed it was an unsecured, 5-year term with interest rates far lower than the market average, and repayments weren’t required until the company would presumably mature.
The investment by FTX was described by BlockFi as a “gamble” that BlockFi creditors shouldn’t be held responsible for.
Three Arrows Capital claims
As one of the main creditors, Three Arrows has also asserted that BlockFi owes them more than $220 million through the liquidators acting on their behalf.
Under bankruptcy law, businesses have the right to reverse transactions that favoured some creditors over others in the months leading to filing for Chapter 11.
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