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 <p class="is-style-lead">Bankrupt BlockFi is contesting efforts by the insolvent FTX and Three Arrows Capital (3AC) to recover millions of dollars owed to their creditors.</p> 
 <p>In a filing to a New Jersey bankruptcy <a rel="noopener noreferrer nofollow" title="court" href="https://thebittimes.com/tag/court.html">court</a> on Aug. 21, BlockFi insisted that its creditors should not be disadvantaged because of the alleged misappropriation of $5 billion by FTX, which had borrowed the amount from BlockFi.</p> 
 <p>The lender stated that FTX’s recovery <a rel="noopener noreferrer nofollow" title="claims" href="https://thebittimes.com/tag/claims.html">claims</a> of over $5 billion against BlockFi would be at the direct expense of BlockFi’s clients and other legitimate creditors.</p> 
 <p>“To prevent further injustice to the creditors of BlockFi’s estates, the Court should disallow the FTX Claims under the doctrine of unclean hands,” BlockFi added.</p> 
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 <p>BlockFi also revealed that FTX had provided $400 million to the lender in June 2022 and bought BlockFi equity under a loan agreement. However, the lender contended that it wasn’t a standard agreement, referring to it as an unsecured, 5-year term below-market interest rates, with <a rel="noopener noreferrer nofollow" title="repayment" href="https://thebittimes.com/tag/repayment.html">repayment</a>s deferred until the firm’s supposed maturity.</p> 
 <p>BlockFi further described FTX’s investment as a gamble and asserted that its creditors should not be held responsible.</p> 
 <blockquote class="wp-block-quote"> 
  <p>“Just because FTX’s fraudulent actions caused FTX’s bet to fail does not mean BlockFi’s creditors are now somehow liable to refund the purchase price.”</p> <cite>BlockFi’s filing</cite> 
 </blockquote> 
 <p>Previously, BlockFi creditors charged the management with overlooking warning signs before lending to FTX but settled last month to push forward a debt <a rel="noopener noreferrer nofollow" title="repayment" href="https://thebittimes.com/tag/repayment.html">repayment</a> plan. Independent BlockFi directors found little reason to be concerned about FTX before it collapsed amid fraud allegations.</p> 
 <p>The filing also mentioned BlockFi’s accusation against the collapsed crypto hedge fund Three Arrows, alleging fraudulent borrowings from the lender, disqualifying potential repayment.</p> 
 <p>Three Arrows’ liquidators announced last month that BlockFi owes them more than $220 million, positioning them as one of its primary creditors. The bankrupt crypto hedge fund warned that BlockFi’s efforts to diminish those <a rel="noopener noreferrer nofollow" title="claims" href="https://thebittimes.com/tag/claims.html">claims</a> might contravene the bankruptcy pause granted to Three Arrows under Chapter 15 protection.</p> 
 <p>The litigation between BlockFi, FTX, 3AC, and others could cost BlockFi up to $1 billion, influencing the amount owed to its creditors.</p> 
 <p>BlockFi filed for Chapter 11 bankruptcy on Nov. 28, roughly two weeks after FTX had taken similar action.</p> 
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BlockFi battles FTX, 3AC in court over repayment claims

TheBitTimes

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