A U.S. bankruptcy court has granted the liquidators of the bankrupt crypto hedge fund Three Arrows Capital permission to significantly elevate their claim against the now-defunct crypto exchange FTX, raising it from $120 million to $1.53 billion.
In a ruling issued on March 13 by the Bankruptcy Court for the District of Delaware, the judge ordered FTX to pay Three Arrows Capital $1.53 billion, marking an increase from the initial claim of $120 million that was filed in June 2023. FTX objected, claiming the timing was inappropriate and that concluding the matter would hinder their bankruptcy proceedings. However, the judge favored the liquidators of Three Arrows Capital, indicating they had sufficiently notified FTX of their claim. The judge noted that the delay in submitting the revised claim was primarily due to FTX’s failure to promptly provide the necessary records to the liquidators of Three Arrows Capital, which were essential for a comprehensive assessment of the claim.
The liquidators of Three Arrows Capital assert that FTX possessed $1.53 billion in assets belonging to 3AC, which were liquidated to settle the debts of 3AC. Additionally, they claim that these transactions could have been avoided, and argue that FTX did not provide the necessary information that would have revealed the liquidation process.
Both Three Arrows Capital and FTX were previously significant entities within the cryptocurrency landscape, but now both have ceased operations. Three Arrows Capital was one of the largest crypto hedge funds, collapsing in June 2022 due to the forced liquidation of over-leveraged positions in Bitcoin (BTC), Ethereum (ETH), and various altcoins. They filed for bankruptcy in July 2022, and their liquidators are presently attempting to recover funds through asset sales and various legal actions, primarily against FTX and Terraform Labs to pay back creditors.
Meanwhile, FTX declared bankruptcy in November 2022 and has also been working to recover funds via numerous lawsuits, including actions against Binance and Changpeng Zhao. Recently, FTX began the process of repayment aided by BitGo and Kraken exchanges.