The proposals put forward by the former crypto lender BlockFi constitute an abuse of bankruptcy rules, according to a legal filing submitted Wednesday by FTX, with over one billion dollars in disputed transactions at stake.
BlockFi's plans, which were to be discussed at a New Jersey court hearing on July 13, have also been contested by the liquidated hedge fund Three Arrows Capital (3AC) and by the federal regulator, the Securities and Exchange Commission (SEC).
FTX, which bailed out the struggling lender last year before declaring bankruptcy in November, claims that its significant claims against BlockFi have been unfairly downgraded by the proposed plan.
"BlockFi's debtors believe that certain bankruptcy sticks may be lifted to extinguish the claims of FTX's debtors... without meeting the fundamental requirements of procedural fairness and due process" in a liquidation plan proposal filed in June, FTX stated. "This is an abuse of the plan process."
FTX cites hundreds of millions of dollars in refunds and collateral related to a loan with FTX's trading branch, Alameda Research, and 1 billion dollars in collateral promises made by Emergent Fidelity, a company created by FTX's chief, Sam Bankman-Fried, to hold shares of Robinhood (HOOD).
The filings are an attempt to untangle the complex financial transactions between cryptocurrency companies currently undergoing separate bankruptcies as they seek to repay customers and other creditors. BlockFi may also have claims against FTX as part of ongoing parallel proceedings in Delaware, which FTX's attorneys "expect to oppose," the filing states.
Three Arrows Capital, which claims that BlockFi owes it over 220 million dollars, also protested that it did not have the opportunity to contest the fraud allegations, while the SEC stated that the proposed clauses to release BlockFi and its management were too vague and broad.
After the SEC expressed similar objections regarding the crypto lender Voyager, legal delays led Binance.US to withdraw its purchase offer for the company. BlockFi's creditors have also argued that its bankruptcy plan is a costly and elaborate way to release executives from legal liability for poor financial decisions, and have stated that the company should simply be liquidated.