The Chief Judge, Michael Kaplan, of the United States Bankruptcy Court for the District of New Jersey, has facilitated a mediation session between the cryptocurrency lender BlockFi and the failing crypto hedge fund Three Arrows Capital (3AC). This decision comes after 3AC attempted to consolidate its various legal proceedings, including their ambitious $284 million claim against BlockFi. The mediation will primarily focus on the so-called ‘preferential payments’ from 3AC to BlockFi, where the hedge fund claims to have made payments nearing $270 million, a larger amount than initially disclosed.
These are, of course, significant sums. We’re talking about hundreds of millions of dollars. That’s the best I can do.
Judge Michael Kaplan, urging both parties to resolve the issue promptly.
A Matter of Timing and Insolvency
Essential to resolving this financial conflict is determining the actual date of 3AC’s insolvency and its relationship with the alleged payments. The significance of this timeline is underscored by the nature of preferential payments in bankruptcy cases.
The courtroom witnessed palpable friction between the two parties. BlockFi’s representation accused 3AC of having a ‘runaway’ legal team, resulting in an accumulation of over $16 million in legal fees. Adam Goldberg, an attorney from Latham & Watkins representing 3AC, vigorously refuted these claims as ‘completely inappropriate and reckless.’ Goldberg depicted a challenging situation for 3AC, highlighting the founders’ escape and the current team’s obligation to rebuild the company’s records, locate assets, and ensure creditors’ protection.