Bankrupt Crypto Exchange FTX Slams Three Arrows Capital’s $1.53B Claim: “3AC Is Owed Nothing”
Bankrupt cryptocurrency exchange FTX is contesting a $1.53 billion recovery claim filed by the liquidators of Three Arrows Capital (3AC), a failed crypto hedge fund. FTX argues that 3AC’s risky trading strategies, not FTX’s actions, caused its collapse. The claim, initially $120 million, was significantly increased after 3AC’s lawyers discovered evidence suggesting FTX liquidated $1.53 billion of 3AC’s assets before 3AC initiated its own liquidation.
FTX maintains that the liquidation satisfied a loan, a claim disputed by 3AC’s lawyers due to insufficient documentation. The bankruptcy court sided with 3AC, finding insufficient evidence of the loan. FTX’s latest filing asserts that on June 12, 2022, 3AC’s assets were worth only $284 million ($1.017 billion in digital assets offset by a negative $733 million USD balance). They highlight that the “first and only” liquidation by FTX on June 14, 2022, involved converting $82 million in crypto to cash, a move they contend benefited 3AC.
FTX contends that 3AC’s losses stemmed from market price declines and its own withdrawals, not FTX’s actions. They accuse 3AC’s liquidators of inflating the asset value by over $1.2 billion and argue that 3AC owes FTX nothing. The filing emphasizes that forcing other FTX customers and creditors to cover 3AC’s losses is legally and factually baseless.
This dispute underscores the complex legal battles surrounding the 2022 crypto market crash. FTX, once a major exchange, filed for bankruptcy in November 2022, initiating a process that saw the distribution of $5 billion to creditors in May. 3AC’s collapse, occurring in June 2022, followed the Terra/Luna ecosystem’s failure, triggering a cascade of failures involving Voyager, Celsius, BlockFi, and Genesis. The legal battle continues, with 3AC having until July 11 to respond before an August 12 hearing. The outcome will significantly impact the distribution of assets in FTX’s bankruptcy proceedings.
