Federal Judge Orders Mediation for BlockFi and Three Arrows Capital Dispute Over $284 Million Payments
A US bankruptcy judge, in order to resolve the legal battle over a significant $284 million claim by bankrupt crypto hedge fund Three Arrows Capital (3AC) against crypto lender BlockFi, has ordered them to enter mediation.
The mediation process, set to commence in January next year, will be facilitated by a neutral third party and is intended to provide an opportunity for BlockFi and Three Arrows Capital to reach a mutually agreeable settlement. If mediation fails to yield an agreement, the case is slated to proceed to trial in February 2024.
The cause of this dispute is centered around what are termed "preferential payments" made by 3AC to BlockFi before the declaration of bankruptcy.
Preferential payments, also known as preferences, are payments made to creditors ahead of a bankruptcy filing, allowing the creditor to collect more than they would have received in a bankruptcy proceeding.
In a confidential report earlier this year by 3AC's liquidator, Teneo disclosed intentions to reclaim a substantial $1.2 billion from Digital Currency Group (DCG) and BlockFi. Of this, the claim against BlockFi stands at $284 million. BlockFi's bankruptcy estate has countered 3AC's claim by alleging that the hedge fund engaged in fraudulent activities.
Should the mediation process fail to lead to a resolution, a two-day hearing is scheduled for February 5, 2024, during which the parties will determine the precise amount of funds to be returned.
Judge Kaplan, who presided over the proceedings, acknowledged the gravity of the matter, stating, "We're talking about hundreds of millions of dollars." He expressed concern that the dispute is already pushing the calendar out further than he'd like for desperate creditors and that he is committed to
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