In a recent development in the ongoing legal battle between crypto lender BlockFi and defunct crypto hedge fund Three Arrows Capital (3AC), a United States judge has granted approval for a settlement resolving claims and disputes between the two entities.
The approval came during a February 6 hearing presided over by New Jersey Bankruptcy Court Judge Michael Kaplan. The settlement aims to halt further legal confrontations between the parties, as BlockFi asserted that 3AC owed it $129 million, while the hedge fund claimed BlockFi owed it $280 million.
Sealed details
Despite granting approval for the settlement, Judge Kaplan ordered that the agreement’s specifics remain sealed from the public eye. He justified this decision by deeming it “counter-intuitive” to disclose the terms and rebuffed the objection raised by the U.S. Trustee to unseal the settlement.
The Trustee argued that the terms should be disclosed as the debtors failed to justify the necessity of sealing the agreement. BlockFi’s motion to seal certain information highlighted the commercial sensitivity of the terms and their potential impact on litigation against bankrupt crypto exchange FTX. The court upheld the motion, citing the need to safeguard settlement strategies and maintain comity with 3AC’s foreign bankruptcy proceeding.
The approval of the settlement enables BlockFi to proceed with distributions from the lending estate to its creditors, a crucial step in its path forward. BlockFi sought this swift approval to facilitate the process of repayment to creditors. Judge Kaplan had previously approved BlockFi’s amended Chapter 11 and customer repayment plan in September 2023, granting the firm clearance for liquidation.
Background and financial obligations
BlockFi’s bankruptcy filing in late November 2022 followed the collapse of FTX, triggering a complex legal entanglement involving several parties. Estimates revealed that BlockFi owed up to $10 billion to over 100,000 creditors, including $1 billion to its three largest creditors and $220 million to 3AC. The collapse of Three Arrows Capital in June 2022 added further complexity to the situation.
In a related development earlier this month, OPNX, a crypto bankruptcy claims platform launched by 3AC co-founders Su Zhu and Kyle Davies, announced its imminent closure. The platform, designed to assist in resolving crypto-related bankruptcies, will cease all operations and shut down by February 14.
