With the settlement now approved, BlockFi can proceed with the distribution of assets from the lending estate to its creditors, the primary reason for seeking expedited approval.
On February 6, a United States judge granted approval for a confidential settlement between BlockFi and the now-defunct crypto hedge fund Three Arrows Capital (3AC), bringing an end to their protracted financial disputes.
Both companies, which filed for bankruptcy in 2022, had been entangled in a contentious legal battle over financial disagreements. BlockFi asserted that 3AC owed them $129 million, while 3AC countered with a claim that BlockFi was indebted to them for $280 million.
However, New Jersey Bankruptcy Court Judge Michael Kaplan resolved the dispute with the latest settlement approval, putting an end to further legal wrangling between the two entities.
Judge Kaplan Agrees to Seal Settlement Details
During the Tuesday hearing, Judge Kaplan concurred to keep the details of the settlement sealed, rejecting the objection from the US Trustee to unseal the agreement. He argued that revealing the details would be “counterintuitive”.
Additionally, Judge Kaplan dismissed the Trustee’s claim that the terms should be disclosed due to insufficient justification from the debtors.
BlockFi had previously requested to seal certain information, citing commercial sensitivity and potential implications for litigation related to the bankrupt crypto exchange FTX. The court’s decision to maintain confidentiality aims to protect the strategies involved in the settlement and honor the ongoing foreign bankruptcy proceedings of 3AC.
With the settlement now approved, BlockFi can proceed with the distribution of assets from the lending estate to its creditors, the primary reason for seeking expedited approval.
BlockFi Owes 3AC $220 Million
In September 2023, Judge Kaplan had previously approved BlockFi’s updated Chapter 11 plan and repayment strategy for its clients, indicating advancement in the company’s liquidation proceedings.
Estimates around that time indicated that BlockFi’s outstanding liabilities could reach $10 billion, involving more than 100,000 creditors. 3AC, to whom BlockFi owed $220 million, was noteworthy among these creditors.
BlockFi’s financial troubles began in 2022 after the company suffered a liquidity crisis following the collapse of FTX. The company survived the initial wave of market turbulence in May after the catastrophic collapse of the Terra (LUNA) blockchain.
At that time, FTX and its founder Sam Bankman-Fried (SBF) rescued the crypto lender with a $400 million revolving credit facility. However, the tides changed when the exchange suddenly collapsed in November, leaving BlockFi in dire straits.
In the same month, the crypto lender paused deposits and withdrawals from its platform, citing poor market conditions, and subsequently filed for bankruptcy officially in the United States.
In October 2023, the company announced its emergence from bankruptcy after 11 months with plans to start repaying its customers. The company stated that the approved restructuring plan enables it to recover assets owned by FTX, 3AC, and other undisclosed companies to repay its creditors.
Part of the plan also includes shutting down the platform. The firm had asked customers to submit withdrawal requests to enable them take out their funds before it completely dissolved the company.
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