A bankruptcy court in the US has permitted the liquidators of the now-defunct crypto hedge fund, Three Arrows Capital (3AC), to raise their claim against the bankrupt crypto exchange FTX from $120 million to $1.53 billion.
Chief Judge John Dorsey dismissed objections from FTX’s debtors, who argued that the revised proof of claim submitted by the 3AC liquidators was not timely and merely an attempt to impede the bankruptcy process.
In a ruling issued on March 13 by the US Bankruptcy Court for the District of Delaware, Dorsey stated that the liquidators had adequately notified FTX of their claim and the intent to amend it after reviewing all available information. He noted that any delays were primarily due to FTX’s failure to promptly provide the necessary documentation.
“The evidence indicates that the delay in filing the amended proof of claim was largely due to the Debtors themselves,” remarked Dorsey.
He further added, “The evidence shows that the liquidators acted diligently to obtain the required information, and despite having access to the full set of data, the Debtors consistently postponed sharing it.”
Initially, the 3AC liquidators lodged a $120 million claim in connection with FTX’s bankruptcy in June 2023. They later extended this claim in November 2024, alleging breaches of contract, unjust enrichment, and fiduciary duty violations.
The liquidators asserted that FTX had possession of $1.53 billion in hedge fund assets that had been liquidated to address $1.33 billion in liabilities back in 2022. They contended that these transactions were avoidable, adversely affected 3AC’s creditors, and highlighted that FTX’s debtors delayed supplying the information that would have revealed the liquidation process.
FTX’s debtors opposed the amended claim, arguing that the initial proof of claim lacked sufficient details about the nature and amount being claimed by the 3AC liquidators, and maintained that it was submitted too late and should be rejected.
Before its downfall in June 2022, Three Arrows Capital was one of the largest crypto hedge funds in the industry, managing assets exceeding $3 billion. Its liquidators have also sought claims against the failed crypto entity Terraform Labs, presenting a claim of $1.3 billion in relation to Terra’s bankruptcy proceedings.
Concurrently, FTX, which declared bankruptcy in November 2022, has commenced its own efforts to recover funds. Last November, they filed several lawsuits, including one against SkyBridge Capital and its founder, Anthony Scaramucci, to reclaim expenses incurred by former FTX CEO Sam Bankman-Fried on sponsorships and investment agreements.
Another lawsuit was directed at crypto exchange Binance and its former CEO, Changpeng Zhao, seeking to recover $1.76 billion worth of crypto that had been transferred to Binance as part of a repurchase agreement in July 2021.
Additionally, Aleksandr Ivanov, the founder of Waves, is facing scrutiny over $80 million in crypto that was sent to the Waves-based decentralized liquidity protocol by Alameda Research in 2022.