BlockFi Challenges FTX, Three Arrows in Legal Dispute Over Repayments
Bankrupt crypto lender BlockFiis trying to block efforts from FTX and Three Arrows Capital (3AC) to recover billions of dollars transacted between the firms before they collapsed last year.
In a Monday court filing, BlockFi accused FTX and Three Arrows Capital of victimizing the company and claimed that they are not entitled to the $5 billion they are seeking to recover.
“To prevent further injustice to the creditors of BlockFi’s estates, the Court should disallow the FTX Claims under the doctrine of unclean hands,” BlockFi said in the filing.
The ongoing dispute has significant implications for the separate bankruptcy proceedings of BlockFi, FTX, and Three Arrows, potentially affecting the repayment amounts to their respective creditors.
BlockFi, currently in the process of liquidation, has expressed concerns that the litigation with FTX, Three Arrows, and other crypto firms could impact its customers' repayment by up to $1 billion.
FTX, in its defense, has said that its primary objective is to recover loan repayments and collateral that were pledged to BlockFi before the firm declared bankruptcy in November.
Under bankruptcy law, failed companies have the ability to unwind transactions that favored specific creditors at the expense of others, particularly in the months leading up to filing for Chapter 11.
FTX is seeking the recovery of $90 million in withdrawals made by BlockFi from FTX.com as well as $400 million in loan repayments made by its trading firm, Alameda Research, among other preferential payments.
However, BlockFi has claimed that the $400 million wasn’t a standard loan agreement.
Instead, the company said it was an unsecured, 5-year term that was well below market interest rates and repayments weren’t due
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