VAN TUBERGEN v. BLOCKFI INC.
3:24-cv-06404
D.N.J.Apr 14, 2025Background
- Van Tubergen obtained a series of cryptocurrency-backed loans from BlockFi, pledging Bitcoin or Ethereum as collateral.
- The parties executed 37 loan security agreements (LSAs), with collateral and loan-to-value (LTV) ratio provisions allowing BlockFi to liquidate in specified circumstances.
- BlockFi issued margin calls when LTV ratios were breached; Van Tubergen did not respond in time, resulting in liquidation of his collateral.
- Van Tubergen filed a $10 million bankruptcy claim, alleging wrongful and improper liquidations; BlockFi's records showed just $19.07 owed.
- The Bankruptcy Court rejected Van Tubergen's claim, validating BlockFi's process, and subsequently denied reconsideration; Van Tubergen appealed.
- The District Court reviewed the appeal, affirming most of the Bankruptcy Court’s decision but remanding for further findings on certain ETH collateral.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Calculation of Collateral Value & LTV | BlockFi failed to use a reasonable methodology & should have used his method | LSAs permit BlockFi to use reasonable discretion in valuation | BlockFi's method was reasonable under the LSAs; affirmed |
| Application of Michigan Law | Bankruptcy Court should have found unconscionability, bad faith, and applied Michigan law to void contract terms | No breach; LSAs are clear, and terms permit BlockFi’s actions | No breach or unconscionability; Michigan law does not alter the result |
| Liquidation Amounts above Required LTV | BlockFi impermissibly liquidated more collateral than necessary | LSAs allow liquidation as needed to re-establish LTV; no excess shown | No evidence of excess liquidation; upheld Bankruptcy Court |
| Pre-liquidation Notices | BlockFi failed to produce or provide required pre-liquidation notices | Notices were sent as contractually required; some situations need no notice | No evidence BlockFi failed to give necessary notice; no abuse of discretion |
| Reliance on BlockFi Representations | BlockFi’s reps assured Van Tubergen his collateral was safe; he relied reasonably | No evidence representatives made binding assurances; LSAs controlled | Bankruptcy Court’s credibility finding stands; no error |
| Scrivener's Error & Missing ETH | BlockFi should have provided additional ETH in a reinstatement transaction | Van Tubergen was obligated to deposit the ETH; documentary support | Remanded for further findings on ETH amount and funding obligations |
Key Cases Cited
- In re Rashid, 210 F.3d 201 (3d Cir. 2000) (standards for appellate review of bankruptcy decisions)
- Mapother & Mapother, P.S.C. v. Cooper, 103 F.3d 472 (6th Cir. 1996) (contract interpretation de novo)
- In re Cohn, 54 F.3d 1108 (3d Cir. 1995) (district court’s role in reviewing bankruptcy determinations)
- In re Brown, 951 F.2d 564 (3d Cir. 1991) (standard of review: clear error for facts, de novo for law)
- DaimlerChrysler Motors, L.L.C. v. Bill Davis Racing, Inc., 408 F. Supp. 2d 337 (E.D. Mich. 2005) (contract interpretation and enforcement)
- Hammond v. United of Oakland, 482 N.W.2d 652 (Mich. Ct. App. 1992) (implied covenant of good faith and fair dealing)
- Franklin Cap. Funding LLC v. Viridis FSM Inc., 2021 WL 391337 (E.D. Mich. 2021) (no breach where contract terms followed)
- First Nat. Bank of Ypsilanti v. Redford Chevrolet Co., 285 N.W. 221 (Mich. 1935) (contract interpretation by intent and plain meaning)