Opponents claim that BlockFi’s plan fails to provide enough information to stakeholders involved in its bankruptcy proceedings.
The United States Securities and Exchange Commission (SEC) has joined bankrupt cryptocurrency firm FTX and hedge fund Three Arrows Capital (3AC) in opposing BlockFi’s bankruptcy plan, according to a court filing on July 5.
SEC objects to BlockFi’s plans
In its filing, the SEC argued that the terms in BlockFi’s proposed plan were vague and broad because they did not provide enough information to help other stakeholders.
As a result, the regulator has asked the court to put a halt to BlockFi’s plans until the company addresses the issues raised.
It reads:
“The debtors need to provide more detailed information about such broad releases so that affected stakeholders can make an informed decision about the plan.”
Meanwhile, the financial regulator further noted that it has a $30 million claim against the bankrupt cryptocurrency company. Last year, BlockFi agreed to pay a $50 million fine to the SEC for failing to register its lending products. At the time, the lender also agreed to pay another $50 million in penalties to settle similar charges in 32 states.
FTX emphasizes “multi-faceted” relationships
For its part, FTX said that while its relationship with BlockFi was “multifaceted,” the lender’s proposal was an “abuse of the planning process.”
In 2022, FTX provided BlockFi with a $250 million revolving credit line, a matter that is now a legal issue in the bankruptcy proceedings of both companies. In addition to this, FTX also highlighted hundreds of millions of dollars in collateral and payments made by Alameda to BlockFi.
Any attempt by BlockFi to recharacterize or comply with these claims will be opposed, FTX wrote, adding that “the BlockFi Debtors are targeting everyone but their pre-petition leadership, and they now seek relief from the pre-petition actions and omissions in their Liquidation Plan.”
3AC’s opposition
3AC argued in its filing that any attempt to subordinate its claims against BlockFi would violate the automatic stay because the company has filed bankruptcy proceedings in U.S. court.
The hedge fund further stated that the plan proposed by BlockFi did not provide the joint liquidators with a “meaningful opportunity to object” to the subordination of its claims to the bankrupt lenders.
3AC said its claim against BlockFi exceeds $220 million, making it one of the bankrupt lender’s significant creditors.
FTX and 3AC responded to the SEC’s criticism, claiming that BlockFi failed to provide stakeholders with sufficient information to assess the feasibility of its plan.