According to CoinDesk, a federal judge has sent lawyers from BlockFi and Three Arrows Capital (3AC) into mediation to try to settle a dispute over $284 million in payments to BlockFi. The U.S. bankruptcy judge overseeing BlockFi's case put 3AC's attempt to pursue the claim into mediation. Chief Judge Michael Kaplan of the U.S. Bankruptcy Court in the District of New Jersey set up a mediation window for the two companies' lawyers to work out a settlement in January, mostly over 3AC's "preferential payments" to BlockFi.

If the sides can't work out how much of the amount should be returned to the defunct hedge fund's own liquidation, Kaplan scheduled a two-day hearing starting on Feb. 5 to allow for arguments over how much money should change hands. Kaplan expressed concern that the dispute is already pushing the calendar out further than he'd like for desperate creditors and that he is committed to getting it done quickly. The dispute over the money is expected to turn upon an answer to a key legal question: When was 3AC actually insolvent, and how does that date relate to when the hedge fund's payments were made?

Tensions were apparent between the sides in court, as a lawyer for BlockFi said 3AC has a "runaway" legal counsel who is dragging things out and piling up more than $16 million in legal bills. A lawyer for the hedge fund, Adam Goldberg from the firm Latham & Watkins, said those comments were "completely inappropriate and reckless." He reminded the court that at 3AC "the founders fled and completely ignored any attempt to engage with them," and those taking down the firm had to rebuild its records, find its assets and secure them for creditors.