Three Arrows Capital’s liquidators have received approval from a U.S. court to increase their claim against the collapsed crypto exchange FTX from $120 million to $1.53 billion.
After filing a claim in FTX’s bankruptcy proceedings in June 2023, 3AC liquidators have actively worked to recover the hedge fund’s funds held on the exchange.
Chief Judge John Dorsey rejected FTX debtors’ objections, ruling that the liquidators’ amended proof of claim was neither untimely nor an unfair attempt to stall the bankruptcy proceedings.
In a March 13 ruling, Judge Dorsey determined that 3AC liquidators had sufficiently notified all parties about their claim and the possibility of future amendments after reviewing all relevant information.
He argued that FTX had failed to share records in a timely manner, which caused the delay.
“The evidence suggests that the delay in filing the Amended Proof of Claim was, in large part, caused by the Debtors themselves,” Dorsey said.
“The evidence also suggests that the Liquidators were diligent in attempting to obtain the information and that despite having the complete information in their possession, the Debtors repeatedly delayed giving it to them.”
3AC liquidators originally filed a $120 million claim in FTX’s bankruptcy case in June 2023.
By November 2024, they had expanded the claim, alleging that FTX had committed contract breaches, engaged in unjust enrichment, and failed to uphold fiduciary duties.
According to the liquidators, FTX had liquidated $1.53 billion in hedge fund assets in 2022 to pay off $1.33 billion in liabilities.
They argued that these transactions should not have occurred, caused losses to 3AC creditors, and that FTX debtors had deliberately withheld crucial information about the liquidation.
FTX debtors objected to the amendment, claiming that the initial proof of claim did not adequately disclose the nature and size of 3AC’s claim and that the liquidators had filed it too late.
At its peak, Three Arrows Capital controlled over $3 billion in assets, making it one of the top crypto hedge funds before its collapse in June 2022.
Terraform Labs, another collapsed crypto firm, has also faced a $1.3 billion claim from the liquidators in its bankruptcy case.
Since November 2022, FTX has focused on recovering lost assets as part of its bankruptcy proceedings.
In November last year, FTX filed three lawsuits, including one against SkyBridge Capital and its founder, Anthony Scaramucci, to retrieve funds that former CEO Sam “SBF” Bankman-Fried had used for sponsorship and investment agreements.
FTX also sued Binance and its ex-CEO, Changpeng Zhao, demanding the return of $1.76 billion in cryptocurrency that FTX had transferred in a July 2021 repurchase agreement.
FTX has taken legal action against Aleksandr Ivanov, the founder of Waves, over $80 million in cryptocurrency that Alameda Research had sent to a Waves-based decentralized liquidity protocol in 2022.
In a recent interview with Tucker Carlson, Sam Bankman-Fried, now facing a lengthy prison term, insisted that he isn’t a criminal. This statement follows his incarceration on August 11, 2023, after a U.S. judge revoked his bail. Convicted of fraud and conspiracy on November 2, 2023, he was subsequently handed a 25-year prison sentence on March 28, 2024.
The ex-CEO of FTX argued that the company’s collapse wasn’t due to unavoidable bankruptcy but stemmed from a liquidity crisis, claiming that FTX could have managed assets worth $93 billion if it hadn’t gone under.
