Crypto News– BlockFi, a cryptocurrency lender currently in bankruptcy, is opposing the efforts of FTX and Three Arrows Capital, also in bankruptcy, to recover hundreds of millions of dollars in order to satisfy their own creditors.
FTX and Three Arrows Capital’s entitlement to repayments is challenged by BlockFi, as per their argument
In a filing submitted to a New Jersey bankruptcy court on August 21, BlockFi argued that its creditors should not be relegated to a lower priority just because FTX’s creditors suffered losses due to FTX’s alleged misuse of $5 billion borrowed from BlockFi. BlockFi added, “To prevent further injustice to BlockFi’s creditors, the Court should reject the FTX Claims based on the principle of unclean hands.”
FTX had previously extended $400 million to BlockFi in June 2022, along with purchasing equity in BlockFi as part of a loan agreement, according to the filing.
FTX seeks to recover on over $5 billion of claims filed against the BlockFi estates at the direct expense of the ultimate victims of FTX’s fraud: BlockFi’s clients and other legitimate creditors.
BlockFi
However, BlockFi contended that this agreement was not a standard loan arrangement; it was an unsecured, 5-year term that featured interest rates significantly below market norms, and repayments were not due until BlockFi supposedly reached a certain level of maturity.
Describing FTX’s investment as a “speculative move,” BlockFi argued that its own creditors should not be held accountable for it.
“FTX’s investment failing due to fraudulent actions does not impose an obligation on BlockFi’s creditors to reimburse the initial investment,” the argument stated. Estimates indicate that BlockFi’s debt stands at as much as $10 billion, spread across over 100,000 creditors. This includes $1 billion owed to the three largest creditors and $220 million owed to the bankrupt cryptocurrency hedge fund 3AC.
BlockFi further alleged that 3AC engaged in fraudulent activities with the borrowed funds, thereby disqualifying it from potential repayment as well.
BlockFi projected that its legal battles with FTX, 3AC, and other firms could result in costs of up to $1 billion, which would impact the total amount owed to its creditors.,
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