Judge Approves BlockFi Settlement With 3AC, But Denies Documents' Unsealing

A New Jersey judge approved the settlement between crypto lender BlockFi and defunct crypto hedge fund Three Arrows Capital (3AC) but ordered the agreement details to remain sealed.

Judge Michael Kaplan of the New Jersey Bankruptcy Court approved the sealed settlement Tuesday to resolve legal claims between the two sides, as first reported by Law360.

In his decision, Kaplan said unsealing the settlement documents would be "counter-intuitive," further noting that there was a need to protect settlement strategies while also providing courtesy to foreign bankruptcy proceedings that 3AC is undergoing.

BlockFi claims that 3AC owed it $129 million, while 3AC claims that BlockFi owed it $280 million. BlockFi, which was in hot water due to creditors' accusations that the digital asset lender engaged in "extortion tactics," filed a motion in January to seal some information about the settlement.

At the time, the Zac Prince-founded crypto lender said the details of the settlement agreement may have an effect on litigation against collapsed cryptocurrency exchange FTX.

Early last year, BlockFi accidentally revealed that some $1.2 billion of its assets were linked to FTX and the fallen crypto exchange's sister company, Alameda Research. The crypto lender has blamed FTX's implosion for its financial crises.

Following the latest development in its legal dispute with 3AC, BlockFi can now proceed with distributions from the lending estate to creditors. Kaplan approved BlockFi's amended Chapter 11 bankruptcy plan in September. He also approved the fallen crypto hedge fund's customer repayment plan at the time.

Estimates during the amended repayment plan's approval showed that BlockFi owed more than 100,000 creditors up to $10 billion, including $220 million to 3AC.

About a month after BlockFi's customer repayment plan was approved, the lender started winding down operations and kicked off the return of crypto assets to its customers. The company said at the time that the amounts customers receive during the repayment process will vary depending on the outcome of FTX's bankruptcy proceedings.

Meanwhile, 3AC's co-founders have other burdens on their backs aside from the defunct hedge fund's legal battles with BlockFi. Co-founders Zhu Su and Kyle Davies were slapped with a nine-year finance ban last year for "contraventions" of Singapore's securities and futures laws and regulations. Under the ban, the two crypto executives are not allowed to do business or engage in regulated activities in Singapore.

OPNX, another crypto firm established by Zhu and Davies that offers trading for bankruptcy claims, announced earlier this month that it would shut down this month since FTX has already reached the "recovery" stage in its bankruptcy process.

The derivatives exchange said customers should withdraw their funds by Feb. 14 as OPNX will disable its withdrawal functionality after the said date.