Legal Battle Between BlockFi, FTX, and 3AC: The Crypto Bankruptcy Shock - COINTURK NEWS
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Legal Battle Between BlockFi, FTX, and 3AC: The Crypto Bankruptcy Shock

1:45 pm (41 days ago)
August 23, 2023

Crypto debt platform BlockFi, which has gone bankrupt, is trying to prevent initiatives that aim to reclaim hundreds of millions of dollars to creditors similar to FTX and Three Arrows Capital, which also went bankrupt. BlockFi’s total debt exceeds an estimated $10 billion, and the company emphasizes that the cost of this bankruptcy case could affect its creditors.

FTX Claims Should Be Rejected

BlockFi, in its application to the New Jersey bankruptcy court on August 21, argued that its own creditors should receive their payments as soon as possible because FTX’s creditors incurred losses due to FTX allegedly misappropriating $5 billion that BlockFi lent to FTX.

BlockFi stated in its statement, “To prevent further injustice to BlockFi’s creditors, the court should reject FTX’s claims under the dirty hands doctrine.” The file stated that FTX provided $400 million to BlockFi in June 2022 and purchased BlockFi’s equity under a credit agreement.

However, BlockFi claimed that this was not a standard credit agreement, it was unsecured, had a term of 5 years, had interest rates well below market rates, and the repayments would not be made until the company’s alleged maturity. BlockFi referred to FTX’s investment as a “gamble” that BlockFi creditors should not be responsible for.

“The fraudulent actions of FTX leading to FTX’s failure do not mean that BlockFi’s creditors are now obliged to refund the purchase price in any way,” it said.

$10 Billion Debt

Estimates show that BlockFi owes up to $10 billion to over 100,000 creditors, with $1 billion to its top three creditors and $220 million to the bankrupt crypto hedge fund 3AC. BlockFi claimed that 3AC committed fraud with the money it borrowed and should not be entitled to any repayment.

BlockFi argues that its legal battle with FTX, 3AC, and other firms could cost it up to $1 billion and could affect the amount owed by its creditors. Several BlockFi creditors had previously accused the company of overlooking several red flags before conducting transactions with FTX and trading firm Alameda Research prior to FTX’s collapse in November 2022. However, creditors reached an agreement with BlockFi last month to proceed with a repayment plan. BlockFi filed for bankruptcy approximately two weeks after FTX filed for bankruptcy on November 28.

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