FTX and 3AC Object to Recharacterizing Claims in BlockFi’s Bankruptcy Plan
FTX, a collapsed Bahamian exchange, and Three Arrows Capital (3AC) liquidators are opposing BlockFi’s Motion for Entry of an Order, a document that, amongst other things, proposes the recharacterization of claims for the purpose of their inclusion in a liquidation schedule.
According to FTX, this move by BlockFi forcibly pushes FTX claims into a Liquidation Plan, stripping FTX of its right to dispute them. Such disputes would involve judges needing to “assess novel questions of law” and a “complicated factual record.”
Complicated Assets Caught Between BlockFi and FTX
Some of the claims between BlockFi and FTX involve assets that are currently unavailable. FTX believes that BlockFi should pursue these revised claims in a separate adversarial proceeding or another plan, stating that this action is “necessary to ensure that the Court provides for a fair, appropriate, and reasonable adjudication of the FTX Claims.”
The objection further highlights that the fate of some claims is connected to assets whose status will be determined at the trial of former FTX CEO, Sam Bankman-Fried, scheduled for October. The assets in question include 56 million Robinhood shares that Bankman-Fried purchased with funds borrowed from Alameda Research, FTX’s primary market-maker, which collapsed with the exchange last year.
Bankman-Fried also provided BlockFi with a $250 million revolving credit line in the aftermath of several major crypto companies collapsing last year.
BlockFi Faces Objections from 3AC Liquidators
BlockFi’s proposed liquidation plan faces additional opposition from Three Arrows Capital’s bankrupt hedge fund. The 3AC liquidators refuse to accept BlockFi’s plan to subordinate a $220 million loan into its liquidation plan, standing by the immunity that 3AC’s US assets have under Chapter 15 bankruptcy law.
The SEC Filing Against BlockFi’s Disclosure Statement Motion
In a separate filing, the US Securities and Exchange Commission (SEC) argues that BlockFi has failed to specify the details of the staff it wishes to release from the liability of pre-bankruptcy decisions. The SEC has asked the court to reject the approval of the Disclosure Statement Motion in the Entry Order until BlockFi sufficiently addresses these and other issues.
BlockFi has been under scrutiny recently, with its Unsecured Creditors’ Committee accusing its CEO and the debtor of using bankruptcy to enrich insiders at the expense of creditors last month. As the battle unfolds, the resolution of BlockFi’s bankruptcy plan remains uncertain.