A U.S. bankruptcy court has granted the liquidators of the failed crypto hedge fund Three Arrows Capital (3AC) permission to expand their claim against the insolvent crypto exchange FTX from $120 million to a staggering $1.53 billion.
In a ruling issued on March 13 by the US Bankruptcy Court for the District of Delaware, the judge ordered FTX to disburse $1.53 billion to Three Arrows Capital, marking a significant increase from the original claim filed in June 2023. FTX challenged this decision, arguing that it was filed too late and would delay their own bankruptcy proceedings. However, the court ruled in favor of 3AC’s liquidators, citing that they had adequately notified FTX of their claim. The judge noted that the delay in presenting the larger claim primarily stemmed from FTX’s failure to promptly provide necessary documents to 3AC’s liquidators, which were crucial for accurately assessing their claim.
The liquidators assert that FTX controlled $1.53 billion of 3AC’s assets, which were subsequently liquidated to address 3AC’s financial obligations. They contend that these transactions were avoidable and that FTX’s lack of transparency prevented the discovery of the liquidation processes.
Both 3AC and FTX were significant figures in the cryptocurrency space before their respective downfalls. Three Arrows Capital, once one of the largest crypto hedge funds, collapsed in June 2022 due to forced liquidations of overleveraged positions in Bitcoin, Ethereum, and various altcoins, leading to its bankruptcy filing in July 2022. The liquidators are currently working to recover funds through asset sales and multiple lawsuits, particularly against FTX and Terraform Labs.
FTX, which declared bankruptcy in November 2022, is similarly engaged in legal battles to recoup funds, including actions against other crypto entities. Recently, FTX initiated a repayment process aided by other exchanges, signaling a gradual effort to address the financial fallout.
