Defunct crypto lender BlockFi faces allegations of Bankruptcy rule abuse in a legal filing by FTX.
BlockFi Encounters Challenges as FTX Alleges Misuse of Bankruptcy Regulations
Amidst a high-stakes battle involving disputed transactions worth over a billion dollars, FTX has lodged allegations against BlockFi, asserting that the proposed plans undermine FTX‘s substantial claims. Notably, FTX came to BlockFi’s aid last year before encountering its own bankruptcy filing.
FTX argues that the proposed plans neglect procedural fairness and fail to meet due process requirements. They point to substantial repayments and collateral associated with a loan from FTX’s trading arm, Alameda Research. Additionally, FTX highlights collateral pledges valued at $1 billion made by Emergent Fidelity, a company established by FTX’s former CEO, Sam Bankman-Fried, to hold shares in Robinhood.
The proposed plans are scheduled for discussion in a New Jersey court hearing on July 13. However, they face opposition from liquidated hedge fund Three Arrows Capital (3AC) and the Securities and Exchange Commission (SEC).
In an attempt to resolve intricate financial transactions within the crypto industry, multiple legal filings have emerged, as various companies undergo separate bankruptcy cases with the goal of repaying customers and creditors. Notably, BlockFi and FTX are entangled in parallel proceedings, with BlockFi potentially having claims against FTX in Delaware. FTX’s legal team expects to contest these claims, as stated in the filing.
In a recent development, creditors of BlockFi have filed a petition for the liquidation of the insolvent cryptocurrency lender. The petition claims that the management engaged in fraudulent activities and misconduct. Furthermore, it is alleged that intentionally delayed the proceedings to secure legal protections for its key executives. Coincu previously reported on these allegations and the mounting challenges faced amidst the ongoing legal battles.
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