July 11, 2024
U.S. Bankruptcy Court Orders Mediation in BlockFi's Case Against Three Arrows Capital
Policy & Regulation

U.S. Bankruptcy Court Orders Mediation in BlockFi’s Case Against Three Arrows Capital

The U.S. bankruptcy court supervising BlockFi’s case ordered Three Arrows Capital (3AC), a failed cryptocurrency hedge fund, to enter into mediation about its $284 million claim against BlockFi.

Specifically regarding 3AC’s “preferential payments” to BlockFi, Chief Judge Michael Kaplan of the U.S. Bankruptcy Court for the District of New Jersey established a mediation window for the legal representatives of the two businesses to negotiate a settlement in January.

Kaplan ordered a two-day hearing beginning on February 5 to allow for discussions regarding how much money ought to change hands if the parties cannot agree on how much of the cash must be restored to the bankrupt hedge fund’s liquidation.

“At issue here are large sums, by all means,” Kaplan stated at a hearing on Tuesday. “We’re talking about hundreds of millions of dollars.”

He expressed worry that the conflict is already delaying the calendar for needy creditors more than he’d like and vowed to finish it as soon as possible.

“This is the best I can do,” Kaplan said, adding that the hearing for 3AC’s move to lift the stay will take place in February.

When a bankruptcy is filed, transactions that may have given the beneficiary a better settlement as a creditor than they may have obtained in court are called preferential payments. Attorneys for 3AC revealed on Tuesday that the corporation, in one instance, paid BlockFi up to $270 million in such payments, which is more than was previously acknowledged.

When was 3AC genuinely bankrupt, and how does that date relate to when the hedge fund’s payments were made? This important legal point is believed to be at the centre of the money dispute.

As a lawyer for BlockFi claimed that 3AC had “runaway” legal counsel who was prolonging the proceedings and accruing more than $16 million in legal costs, tensions between the parties were evident in court. Adam Goldberg, a lawyer representing the hedge fund with the firm Latham & Watkins, described the remarks as “completely inappropriate and reckless.” He said that when 3AC was taken down, “the founders fled and completely ignored any attempt to engage with them,” and that those responsible for doing so had to reconstruct the company’s documents, identify its assets, and secure them for creditors.

Image: Freepik

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