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Bankrupt cryptocurrency lender BlockFi is trying to block attempts by the similarly bankrupt FTX and Three Arrows Capital (3AC) that aim to retrieve hundreds of millions of dollars to pay back their creditors.<\/p>\n
BlockFi claimed in an Aug. 21 filing<\/a> to a New Jersey bankruptcy court that its own creditors shouldn\u2019t be pushed to the back of the line because FTX\u2019s creditors were harmed by the exchange allegedly misappropriating $5 billion BlockFi lent it.<\/p>\n \u201cFTX seeks to recover on over $5 billion of claims filed against the BlockFi estates at the direct expense of the ultimate victims of FTX\u2019s fraud: BlockFi\u2019s clients and other legitimate creditors.\u201d<\/p><\/blockquote>\n \u201cTo prevent further injustice to the creditors of BlockFi\u2019s estates, the Court should disallow the FTX Claims under the doctrine of unclean hands,\u201d BlockFi added.<\/p>\n FTX also provided $400 million to BlockFi in June 2022 in addition to buying BlockFi equity pursuant to a loan agreement, the filing stated.<\/p>\n However, BlockFi claimed it wasn\u2019t a standard loan agreement \u2014 it was an unsecured, 5-year term that was well below market interest rates and repayments weren\u2019t due until the firm would supposedly mature.<\/p>\n BlockFi referred to FTX\u2019s investment as a \u201cgamble\u201d that BlockFi creditors shouldn\u2019t be liable for.<\/p>\n \u201cJust because FTX\u2019s fraudulent actions caused FTX\u2019s bet to fail does not mean BlockFi\u2019s creditors are now somehow liable to refund the purchase price,\u201d it argued.<\/p>\n Estimates show BlockFi owes up to $10 billion to over 100,000 creditors<\/a> including $1 billion to its three largest creditors and $220 million to bankrupt crypto hedge fund 3AC. <\/a><\/p>\n BlockFi claimed 3AC committed fraud with the money it borrowed and argued it also shouldn\u2019t be entitled to a potential repayment.<\/p>\n BlockFi claims its litigation with FTX, 3AC and other firms could cost it up to $1 billion \u2014 impacting the amount its creditors are owed.<\/p>\n Related: <\/em><\/strong>BlockFi opens crypto withdrawals for eligible US users following court order<\/em><\/strong><\/a><\/p>\n Several BlockFi creditors previously accused the firm of overlooking several red flags<\/a> before transacting with FTX and its trading firm Alameda Research in the months prior to FTX\u2019s collapse in November 2022.<\/p>\n Despite this, creditors settled with BlockFi last month to move forward with a repayment plan.<\/p>\n