FTX objected to BlockFi’s bankruptcy plan Wednesday, claiming it “still suffers from certain fundamental shortcomings.”
FTX’s attorneys believe that “the Plan unfairly discriminates against the FTX Claims in certain respects” and have asked the Court to deny the plan.
The opposition comes after BlockFi claimed it fell victim to FTX’s former CEO Sam Bankman-Fried actions. FTX is accused of misappropriating and commingling customer funds with Alameda Trading, its sister firm, in a scheme to defraud investors.
FTX is attempting to recover both loan repayments and collateral from the bankrupt crypto lender.
“The FTX Debtors do not seek to impede the BlockFi Debtors’ efforts to return value to their creditors, but, in the absence of a consensual resolution, must ensure any plan is fair to the FTX Debtors’ creditors, who are the beneficiaries of the FTX Claims,” the Wednesday filing said.
FTX argued in the Wednesday filing that the debtors for both BlockFi and FTX had attempted to work “constructively” to reach a proposal “to fairly and efficiently resolve the complex issues between the parties” due to the “dueling debtor” claims.
A July report from BlockFi’s committee of unsecured creditors found that BlockFi was aware of the risks associated with lending to Alameda.
“BlockFi’s reliance on Alameda/FTX led to foreseeable (actually foreseen) losses of a staggering quantum,” the report stated. FTX and Alameda defaulted on around $680 million in collateralized loan obligations.
Furthermore, BlockFi’s credit risk team allegedly drafted a memo warning that Alameda “had unaudited financials” and “was offering volatile collateral.”
However, in an August filing, BlockFi argued that FTX and Alameda’s “scheme included fraudulently inducing BlockFi to loan over $1 billion worth of digital assets deposited on the BlockFi platform to Alameda Research.”