FTX, 3AC, and SEC Jointly Refute BlockFi’s Bankruptcy Claims
A recent report revealed that two collapsed crypto exchanges, FTX and Three Arrows Capital (3AC), have reportedly joined hands with the United States Securities and Exchange Commission to condemn the new bankruptcy plan raised by BlockFi.
According to the report, the two business entities that recently went bankrupt have objected BlockFi’s decision to file for Chapter 11 bankruptcy. Meanwhile, during the process, they revealed the billion-dollar investment that caused their dispute.
On June 7th, the collapsed FTX exchange reportedly filed a lawsuit against the Chapter 11 bankruptcy procedures suggested by BlockFi. In the case, FTX motioned for the disapproval of BlockFi’s motion for disclosure.
In addition, FTX stated that there is an urgent matter that the two exchange needs to resolve on a transaction that is reportedly worth more than a billion dollars.
As revealed by the report, BlockFi presented two major files to the court on the 28th of last month. One contained its Disclosure Statement, while the other held its Amended Joint Chapter 11 Bankruptcy Plans.
According to the plan, BlockFi wants Third Party Release protection, which would legally shield it from certain individuals and business entities while the bankruptcy case progresses.
In addition, the Release provision included in the exchange’s plan aimed at nullifying many legal accusations and other obligations that might surface when the bankruptcy case starts. Also, it aims to provide any necessary relief considered appropriate and fair to the exchange in the future.
FTX and 3AC Strongly Oppose BlockFi’s Plan
However, FTX exchange vehemently opposed the suggested plan and disclosure statement made by BlockFi. The former’s spokesperson stated that the arrangement would significantly reduce its claims to BlockFi unfairly.
Furthermore, FTX pointed out that BlockFi has massive loan repayment and collateral funds in association with its twin firm, Alameda Research. It claimed that the loan was worth hundreds of millions of USD.
In addition, the FTX representative continued that there is a collateral pledge worth about $1 billion, which was made by Sam Bankman-Fried, the former FTX CEO, through his other firm, Emergent Fidelity, to own shares in the Robinhood.
Reinforcing FTX’s stance, the United States and Three Arrows Capitals have tagged along, strongly opposing the disclosure statement made by BlockFi, according to the report.
The report showed that 3AC was once a significant creditor of BlockFi, and after its collapse, it held several claims to BlockFi. However, to protect its claims, 3AC vehemently opposed BlockFi’s disclosure motion claiming it was a violation of the due process requirement.
In addition, 3AC argued that it could only withdraw its claims against the firm if its basic settlement requirements were satisfied. 3AC claimed that the suggested confirmation procedures forwarded by BlockFi violate its Chapter 15 case.
According to the report, BlockFi has not sought relief from the stay that 3AC’s lawsuit placed on it, preventing it from chasing after equitable subordination of the claims from 3AC.
The US SEC Also Opposes BlockFi’s Bankruptcy Plan
In conjunction, the US SEC also plunged into the case, opposing the disclosure statement and Chapter 11 bankruptcy plan made by BlockFi.
According to the report, the SEC objects to the adequacy of the disclosure statement and other related issues in alignment with limited objection and rights reservation.
Although the legal counsel team representing BlockFi has addressed some of the points raised by the SEC, the regulator still holds some right to reform its objections and to object to other parts of the documents BlockFi submitted to the court.
Furthermore, the report showed that the SEC did not reveal any legal assertion on the compliance level of the transactions listed in the Plan of the exchange to its securities rules. However, it has the right to question transactions made in digital assets.
Following the SEC’s objection concerning BlockFi’s latest court documentation, other creditors of the firm have started voicing out, according to the report.
They claimed BlockFi’s disclosure plan is highly convoluted and expensive to vindicate the accountability officer for their fund mismanagement. Therefore, many of the creditors reportedly claimed that BlockFi should undergo liquidation instead.
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