In a significant legal saga, major players such as FTX, Three Arrows Capital (3AC), and the Securities and Exchange Commission (SEC) joined forces to object BlockFi’s bankruptcy plans, bringing to light a billion-dollar disagreement. The contention centers around an assertion by FTX, arguing that BlockFi’s proposed steps manipulate bankruptcy rules, involving disputed transactions valued over a hefty billion dollars.
Late June 2023, BlockFi submitted a Disclosure Statement and the Second Amended Joint Chapter 11 Plan, involving provisions termed “Third Party Releases”. These releases are intended to address a variety of legal claims and similar obligations that could occur during bankruptcy proceedings, promising fair and suitable relief.
FTX, however, firmly resists the Disclosure Statement and the suggested plan, citing that it unjustly reduces its extensive claims against BlockFi. FTX outlines considerable repayment and collateral sums linked to a loaning agreement with its trading division, Alameda Research, totaling hundreds of millions of dollars. The company also flags up $1 billion in collateral commitments by Emergent Fidelity, a firm crafted by FTX’s CEO, Sam Bankman-Fried, to possess shares in Robinhood.
3AC and the SEC have echoed FTX’s concerns. 3AC, being one of BlockFi’s most influential creditors, is striving to safeguard its claims and opposes the Disclosure Statement Motion, asserting violations of procedural fairness and due process prerequisite. Meanwhile, the SEC has voiced reservations concerning the sufficiency of the disclosure statement, although some have been addressed by BlockFi, the regulator retains the prerogative to adjust its objection depending on developing circumstances. No legal standpoint has been provided by the SEC on compliance with federal securities laws regarding the transactions detailed in the Plan, but it maintains the power to contest transactions involving crypto assets.
Further to these dissenting voices, some of BlockFi’s creditors paint the company’s bankruptcy strategy as an elaborate way to absolve executives from accountability for their financial missteps. Their belief is rooted in the idea that liquidation of the company should be the course of action rather than a complicated bankruptcy plan. This high-stakes disagreement underscores the tension between regulatory bodies, crypto companies, and their creditors which is only anticipated to grow as digital currencies become further embedded in our financial landscape.
Source: Cryptonews
