FTX Lawyers Challenge Three Arrows Capital’s $1.53 Billion Claim Over Risky Crypto Strategy

Judge Approves Expanded $1.53 Billion Claim by Three Arrows Capital Liquidators

In a significant development, the US Bankruptcy Court approved Three Arrows Capital’s (3AC) liquidators’ motion to expand their claim against FTX from an initial $120 million to a staggering $1.53 billion. This claim encompasses allegations of breach of contract, fiduciary duty violations, and unjust enrichment. The liquidators argue that FTX held substantial 3AC assets, which were liquidated during 2022 to cover liabilities, and contend that these transactions were avoidable. They further assert that FTX delayed disclosing critical information that could have prevented or mitigated 3AC’s collapse. Chief Judge John Dorsey’s approval in March marks a pivotal moment in the ongoing bankruptcy litigation, setting the stage for intense legal scrutiny over asset valuations and transactional legitimacy.

FTX Counters with Strong Objection to 3AC’s Claims

FTX’s legal representatives have filed a robust objection, labeling the $1.53 billion claim as “illogical and baseless.” They emphasize that 3AC’s downfall was primarily due to its own aggressive leveraged trading strategy, which hinged on the expectation of rising crypto prices. When the market sharply declined, 3AC’s positions became untenable, leading to its insolvency. FTX argues that creditors and other exchange customers should not be held liable for losses incurred through 3AC’s speculative bets. Furthermore, FTX disputes the accuracy of the account balances cited by 3AC’s liquidators, highlighting discrepancies between the claimed $1.59 billion crypto balance and their own assessment of $1.02 billion as of June 12, 2022. This fundamental disagreement over asset valuation underpins much of the dispute, with FTX asserting that 3AC’s claim lacks both legal and factual merit.

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