BlockFi and 3AC have reached an agreement, which is a step towards settling their ongoing dispute. However, the settlement is kept under blankets by a judge for now.
The collapsed crypto hedge fund Three Arrows Capital (3AC) and former bankrupt crypto lender BlockFi have reached a decision in which the two crypto-related entities have agreed to the process of settling their ongoing legal disputes.
A United States Bankruptcy judge allowed these two firms to resolve their claims and disputes but ordered that the settlement details remain sealed.
In a hearing that was conducted on February 6, Judge Michael Kaplan of the New Jersey Bankruptcy Court approved a settlement between 3AC and BlockFi, which hopefully prevents any further legal tussle between the two firms.
BlockFi has claimed that 3AC owes them $129 million, while 3AC made a counterclaim that BlockFi owed 3AC $280 million.
Kaplan refused to reveal the settlement agreement, asserting that it would not be a productive approach to do so at the time. He also countered the objection raised by the U.S. Trustee, who argued that the terms should be made public since the debtors hadn’t provided sufficient justification for sealing the settlement.
Meanwhile, BlockFi’s request to seal specific details contended that the terms contain commercially sensitive information that could affect ongoing litigation involving the bankrupt cryptocurrency exchange FTX.
The court approved the request to seal the information, highlighting the importance of safeguarding settlement strategies and showing mutual respect with 3AC’s foreign bankruptcy proceedings.
3AC and BlockFi were both the victims of the TerraLUNA crash in 2022. 3AC was involved in taking risky leveraged bets and suffered massive losses once the crypto market crashed following Terraform Labs’ implosion. Since they lost heavily when the market went in the direction opposite to their prediction, they were forced to file for liquidation in the British Virgin Islands.
In July 2022, they filed for Chapter 15 recognition in the Southern District of New York. The Chapter 15 recognition allows foreign debtors to protect their US assets while undergoing liquidation proceedings in their home country.
BlockFi also suffered a direct impact from 3AC’s Chapter 15 bankruptcy protection because the firm had given a substantial amount in loans to 3AC, according to one of their representative. The implosion of FTX in the following month crippled the crypto lender further, and they were forced to declare bankruptcy later that year in November 2022.
The firm, however, successfully managed to raise itself out of bankruptcy in September 2023 after getting approval from the U.S. bankruptcy court and announcing that it would wind down its operations and formulate plans to repay its customers.
Returning to the current developments regarding 3AC and BlockFi, approval of the settlement enables BlockFi to distribute funds from the lending estate to creditors, which is why it has sought rapid approval.
Kaplan approved BlockFi’s revised Chapter 11 and customer repayment plan in September 2023, paving the way for the company’s liquidation process.
At that time, estimates suggested BlockFi’s debts totaled around $10 billion, owed to over 100,000 creditors. The three largest creditors collectively owed $1 billion, with 3AC owed $220 million.
Additionally, in February, OPNX, a cryptocurrency bankruptcy claims platform founded by Su Zhu and Kyle Davies of 3AC, announced its decision to cease operations and shut down by February 14.
OPNX, also known as Open Exchange, was a unique platform founded by 3AC’s founders, Su Zhu and Kyle Davies. It is a hybrid model operating as a crypto exchange and bankruptcy claims platform. The purpose of the OPNX exchange was to facilitate the trading of creditor claims from insolvent cryptocurrency companies.
Current users of OPNX were strongly urged to settle all their positions by February 7, 2023, and withdraw all their funds from the platform by February 14. After the deadline date, the withdraw function will be deactivated.
The announcement of OPNX’s closure led to a rapid decline in the price of its native OX token, dropping 38% from $0.01 to $0.006 within an hour, as reported by CoinGecko.
Su Zhu and Kyle Davies disappeared from the map after their crypto hedge fund company collapsed. Teneo, the firm handling the liquidation of 3AC’s assets, resorted to subpoenaing the pair via messages on X (formerly), as they had concealed information about their physical whereabouts.
Su Zhu was apprehended by authorities in Singapore in September 2023 when he tried to leave the country. The whereabouts of Kyle Davies have yet to be determined so far, though there were rumors in the past that he was spotted in Bali, Indonesia.
The closure of OPNX further aggravates the challenges faced by Zhu and Davies. Teneo is actively pursuing the recovery of $1.3 billion directly from the founders, alleging they leveraged significant amounts of investor funds after their hedge fund became insolvent.
