The dispute over preferential payments from failed crypto hedge fund Three Arrows Capital (3AC) to crypto lender BlockFi was sent to mediation by the US bankruptcy judge overseeing BlockFi’s case.
Chief Judge Michael Kaplan of the US Bankruptcy Court in New Jersey set up a mediation period in January for the companies’ lawyers to try and settle 3AC’s $284 million claim against BlockFi. This claim is primarily regarding preferential payments that 3AC made to BlockFi.
If the sides cannot agree on how much should be returned to 3AC’s liquidation through mediation, Kaplan has scheduled a two-day hearing starting February 5th to hear arguments on the amount.
Kaplan acknowledged the large sums of money involved, noting “We’re talking about hundreds of millions of dollars.” He wants to resolve the dispute quickly given the urgency for 3AC’s desperate creditors.
3AC lawyers said in court that the company paid as much as $270 million in preferential payments to BlockFi, more than previously reported.
The key legal question the dispute hinges on is when 3AC became insolvent, and how that date relates to when the payments were made.
Tensions were evident between the companies’ lawyers. BlockFi’s counsel argued 3AC’s lawyer was dragging things out and racking up $16M in legal bills. 3AC’s attorney responded that comments were inappropriate given 3AC founders fled and records had to be rebuilt for creditors after the collapse.