The U.S. Securities and Exchange Commission (SEC), alongside bankrupt crypto firms FTX and hedge fund Three Arrows Capital (3AC), have objected to BlockFi’s bankruptcy plans, according to July 5 court filings.
SEC opposes BlockFi’s plans
In its filing, the SEC argued that the clauses in BlockFi’s proposed plans were ambiguous and broad, as they did not provide adequate information that would aid other stakeholders.
Consequently, the regulator has requested the court to suspend BlockFi’s plan until the firm resolves the concerns raised.
It wrote:
“The Debtors need to provide more detailed information about such broad releases to permit affected stakeholders to make an informed decision with respect to the Plan.”
Meanwhile, the financial regulator further noted that it holds a $30 million claim against the bankrupt crypto firm. Last year, BlockFi agreed to pay a fine of $50 million to the SEC for failing to register its lending product. At the time, the lender also agreed to pay another $50 million in fines to settle similar charges in 32 states.
FTX highlights the ‘multifaceted’ relationship
For FTX, the bankrupt exchange stated that while its relationship with BlockFi is “multifaceted,” the lender’s proposal is an “abuse of the plan process.”
In 2022, FTX extended a $250 million revolving credit facility to BlockFi, a matter which has now become a legal issue amidst both firms’ bankruptcy proceedings. Beyond that, FTX further highlighted several hundreds of millions of dollars in collateral and payments made by Alameda to BlockFi.
FTX wrote that any attempt by BlockFi to recharacterize or subordinate these claims would be objected to, adding that “the BlockFi Debtors are pointing fingers at everyone but their prepetition leadership, for whom they now seek releases for prepetition actions and omissions in the Liquidating Plan.”
3AC’s objection
In its filing, 3AC argued that any attempt to subordinate its claims against BlockFi would violate the automatic stay as it has its bankruptcy case before a U.S. court.
The hedge fund further stated that BlockFi’s proposed plan does not give Joint Liquidators a “meaningful opportunity to object to subordination” of its claims against the bankrupt lender.
3AC said its claims against BlockFi exceed $220 million, making it one of the bankrupt lender’s significant creditors.
FTX and 3AC echoed the SEC’s criticism, asserting that BlockFi failed to furnish enough information for stakeholders to appraise the feasibility of their plans.
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Source: https://cryptoslate.com/sec-ftx-and-three-arrows-capital-contest-blockfis-bankruptcy-plans/