Key Takeaways:
- FTX argues that Three Arrows Capital’s (3AC) $1.53 billion claim is based on a failed high-risk trading strategy, not wrongdoing by the exchange or its creditors.
- FTX says the only liquidation of 3AC assets was $82 million — contractually permitted — and disputes 3AC’s account balance calculations that underpin the claim.
Lawyers representing the collapsed cryptocurrency exchange FTX have pushed back hard against a $1.53 billion claim filed by the liquidators of the defunct hedge fund Three Arrows Capital (3AC), calling the allegations “illogical and baseless.”
Filed Friday in the US Bankruptcy Court for the District of Delaware, FTX’s objection asserts that 3AC’s massive losses were the result of high-risk trading strategies — not any wrongdoing by the exchange or its creditors.
FTX: 3AC’s claim relies on false premises
In June 2023, 3AC’s liquidators filed an initial $120 million claim in FTX’s bankruptcy proceedings. They later expanded the demand to $1.53 billion in November 2024, alleging FTX had improperly liquidated the hedge fund’s assets in 2022. The liquidators claim these actions contributed to 3AC’s collapse and constituted avoidable transactions, breach of fiduciary duty, and unjust enrichment.
However, FTX lawyers argue that 3AC knowingly “bet big” on a crypto market upswing, and when prices crashed, the firm’s strategy failed. They say 3AC’s current claim tries to make other FTX customers and creditors “foot the bill” for its own failed bets.
FTX also disputes how the $1.53 billion figure was calculated. According to their filing, 3AC incorrectly based its numbers on account balances from June 12, 2022. At that point, FTX says, 3AC’s crypto balance was actually $1.02 billion, not $1.59 billion — with an overall available balance of just $284 million after withdrawals and market losses.
Liquidation actions “contractually permitted,” say FTX lawyers
FTX further contends that only $82 million in 3AC crypto assets were liquidated — an action allowed under credit and margin agreements to maintain account balance requirements. Moreover, the lawyers say this liquidation preserved value for 3AC by shifting deteriorating digital assets into stable fiat holdings.
Also Read: FTX Users Battle for $2.2B in Disputed Claims Amid Ongoing Bankruptcy Chaos
The legal battle continues, with 3AC having until July 11 to respond to FTX’s objection. A non-evidentiary hearing is set for August 12 before Chief Judge Karen Owens in the Delaware bankruptcy court.
Meanwhile, both firms continue pursuing claims in other high-profile crypto bankruptcies. 3AC has filed a $1.3 billion claim against Terraform Labs, while FTX’s estate has launched multiple lawsuits seeking to recover funds lost during its 2022 collapse.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
