A petition filed by Three Arrows Capital (3AC) to significantly increase its claim against the FTX estate from $120 million to $1.53 billion has been granted by the Delaware bankruptcy court overseeing the FTX proceedings. This decision represents a significant step in the aftermath of the collapse of Sam Bankman-Fried’s cryptocurrency empire.
Once a leading crypto hedge fund with reported net assets exceeding $3 billion, 3AC fell victim to the market turmoil in 2022 while it maintained substantial financial connections with FTX, Bankman-Fried’s exchange that also faced imminent failure. The hedge fund originally lodged a proof of claim for $120 million against FTX back in July 2023, joining a long list of users and investors that suffered losses due to FTX’s swift bankruptcy.
In November 2024, liquidators for 3AC revised their claim after uncovering new information suggesting FTX had liquidated $1.53 billion in assets belonging to 3AC just two weeks before 3AC initiated its own liquidation processes two years prior. They contended that the liquidation was meant to cover a $1.3 billion liability owed to FTX, a claim that 3AC argued lacked solid backing.
While FTX asserted that the $1.3 billion represented collateral for a loan it had extended to 3AC, the court sided with 3AC, citing inadequate proof regarding FTX’s loan assertion.
This ruling enables 3AC to pursue a much larger share of the remaining assets of FTX, which could alter how payouts are distributed to other creditors.
FTX, which began disbursing funds to creditors in February 2025, expressed that the enlarged claim should have been submitted earlier, claiming that it adds strain on other creditors and complicates the reorganization process. However, the court concluded that the delay on 3AC’s part was warranted, as the liquidators only fully grasped the scale of their claim by mid-2024 due to absent financial records from FTX and a lack of cooperation from 3AC founders, Zhu Su and Kyle Davies.
Founded in 2012, 3AC emerged as a formidable player in the cryptocurrency financial sector by 2022. Its downfall triggered a series of failures across the broader crypto market that ultimately unveiled fraudulent activities within Sam Bankman-Fried’s operations.
Bankman-Fried is actively appealing his criminal conviction and a 25-year sentence. Following 3AC’s collapse, Su was apprehended in Singapore and received a four-month prison sentence for non-compliance with the liquidators. In contrast, Davies has not faced charges linked to the hedge fund’s downfall.
In 2023, the founders of 3AC regrouped to establish a brief venture, a crypto exchange called OPNX, aimed at facilitating trades of bankruptcy claims from failed crypto firms; however, it ceased operations in February.
With the court’s recent decision, 3AC’s liquidators now hold a considerably larger stake in the FTX bankruptcy proceedings, raising concerns about how the expanded claim will influence distributions to other creditors. This ruling further highlights the lack of transparency within both FTX and 3AC, complicating the efforts to disentangle the assets and obligations of both entities.