Lawyers representing the defunct crypto exchange FTX have rejected a $1.53 billion claim filed by Three Arrows Capital’s liquidators, asserting that the losses stemmed from a high-risk trading strategy and should not be covered by FTX’s creditors.
Judge Approves Expanded Claim by Three Arrows Capital
Three Arrows Capital’s liquidators initially submitted a $120 million claim in FTX’s bankruptcy case in June 2023. By November 2024, they expanded the claim to $1.53 billion, alleging breach of contract, breach of fiduciary duty, and unjust enrichment.
According to the liquidators, FTX had liquidated $1.53 billion worth of 3AC assets in 2022 to cover liabilities, a move they claim contributed to the hedge fund’s collapse. They argued the transactions were avoidable and accused FTX’s debtors of delaying the release of information that would have revealed the extent of the liquidation.
In March, Chief Judge John Dorsey sided with 3AC’s liquidators and approved the expanded claim.
FTX Calls Claims Illogical and Without Merit
In a filing submitted Friday to the U.S. Bankruptcy Court in the District of Delaware, FTX lawyers pushed back against Three Arrows Capital’s $1.53 billion claim, calling it “illogical and baseless.”
They argued that 3AC made aggressive bets on a crypto market upswing, but when prices crashed, the firm suffered the consequences of its “own risky strategy.”
“The Joint Liquidators ask this Court to force other Exchange customers and creditors to foot the bill for 3AC’s failed strategy by asserting illogical and baseless claims for $1.53 billion,” FTX’s legal team stated.
A key dispute centers on how 3AC calculated its claim. FTX attorneys contend that the hedge fund relied on inaccurate account data from June 12, 2022—claiming a crypto balance of $1.59 billion and a negative USD balance of $1.3 billion—while FTX maintains the actual crypto balance was $1.02 billion and the USD liability stood at $733 million.
FTX also challenged the “lost asset” theory underpinning 3AC’s claim, which seeks to recover nearly the full crypto balance allegedly lost after that date. FTX called the premise “false” and argued it has no legal or factual basis.
According to FTX, 3AC had an actual available balance of just $284 million, which was further diminished by market downturns and $60 million in withdrawals by the hedge fund itself.
FTX Claims Liquidation Totaled Only $82 Million
In its objection, FTX’s legal team asserted that the only liquidation carried out against Three Arrows Capital amounted to $82 million in crypto—an action they claim was “contractually permitted” under existing credit and margin agreements to maintain required account balances.
The objection further argues that the liquidation did not diminish 3AC’s overall account value, as the proceeds were transferred into 3AC’s fiat account in U.S. dollars.
“Notably, the $82 million liquidation benefited 3AC by preserving the value of its accounts,” FTX stated. “Through the liquidation, 3AC exited deteriorating digital asset positions in favor of more stable fiat holdings.”
Three Arrows Capital has until July 11 to respond to FTX’s objection. A non-evidentiary hearing is scheduled for August 12 before Chief Judge Karen Owens in the U.S. Bankruptcy Court for the District of Delaware.
FTX and Three Arrows Capital Pursue Recovery of Alleged Debts
Three Arrows Capital has also filed a $1.3 billion claim in the bankruptcy case of collapsed crypto firm Terraform Labs, seeking to recover alleged losses.
Meanwhile, FTX, which entered bankruptcy in November 2022, has been actively pursuing its own recovery strategy, launching a series of lawsuits aimed at reclaiming lost funds.
