BlockFi and 3AC Resolve Counterclaims in Bankruptcy Settlement, but There’s a Catch

A settlement between defunct crypto lending company BlockFi and the collapsed hedge fund Three Arrows Capital (3AC) was approved by a US bankruptcy court on February 7. The specific terms of the settlement, though, remain confidential.

According to the official document, the approval effectively resolved any counterclaims between the parties. Judge Kaplan of the New Jersey Bankruptcy Court, in the Tuesday hearing, expressed that it doesn’t make sense to demand disclosure of settlement details.

Prior to the latest development, the US Trustee urged the judge to reveal the details, arguing that the debtors had not provided sufficient reasons to keep the information undisclosed.

BlockFi had previously requested to seal the information in January, citing its sensitive nature and potential negative impact on future legal proceedings.

In November 2022, BlockFi sought Chapter 11 bankruptcy protection, a move prompted in part by the collapse of crypto exchange FTX, which had filed for bankruptcy just two weeks earlier. BlockFi’s financial troubles were exacerbated by its significant ties to the failed crypto exchange.

BlockFi’s Chapter 11 plan to reimburse its 10,000 creditors received approval from the bankruptcy court in September 2023.

Subsequently, in October, the company announced its successful emergence from bankruptcy and initiated creditor repayments.

BlockFi claimed that 3AC owed them $129 million, while the latter argued that the former owed $280 million.

This legal dispute was just one aspect of the wider upheaval within the crypto sector, with various entities grappling with financial difficulties and legal disputes.