A bankruptcy judge asked the two companies to work out a settlement in a mediation window scheduled for January 2024.

Bankrupt crypto hedge fund Three Arrows Capital’s (3AC) claim against bankrupt crypto lender BlockFi was put into mediation by the bankruptcy judge overseeing the case, CoinDesk reported on Tuesday.

Judge Michael Kaplan of the U.S. Bankruptcy Court in the District of New Jersey asked the two parties to resolve a dispute over the return of 3AC’s preferential payments to BlockFi in mediation scheduled for January.

Preferential claims are generally pursued by the liquidators of a bankrupt company, with the purpose of distributing it to the creditor, if the transaction in question involved the company giving a creditor unfair preference.

Earlier this year, a confidential report from 3AC liquidator Teneo revealed its intent to claw back $1.2 billion worth of funds from Digital Currency Group (DCG) and BlockFi. The liquidator disclosed that its claims against BlockFi were to the tune of $284 million. 

BlockFi’s bankruptcy estate argued that 3AC was not entitled to any repayment, alleging that the hedge fund had engaged in fraudulent behavior. 

If 3AC and BlockFi cannot arrive at a solution during the mediation process, they will have to determine the amount of funds to be returned in a two-day hearing scheduled for Feb. 5, 2024.

“At issue here are large sums, by all means. We’re talking about hundreds of millions of dollars,” Judge Kaplan said at the hearing, voicing concerns that 3AC’s motion to lift the stay on the claim delayed the resolution of a plan to return money to creditors.

“This is the best I can do,” he added.