FTX disputes the $1.53 billion claim from 3AC

The dispute between FTX and Three Arrows Capital (3AC) has intensified with FTX’s rejection of the $1.53 billion recovery request made by 3AC’s liquidators, accusing the counterpart of having adopted a failed trading strategy.

The roots of the financial controversy between FTX and 3AC

The incident dates back to the summer of 2023, when the liquidators of 3AC filed an initial claim for compensation of 120 million dollars in the context of the FTX bankruptcy. However, by November 2024, this figure had risen to 1.53 billion, claiming that such losses resulted from breach of contract, fiduciary duty, and unjust enrichment by the exchange platform.

The liquidators claim that FTX held and then liquidated 3AC’s assets for that amount in 2022, exacerbating the hedge fund’s collapse. According to them, these transactions could have been avoided and that FTX delayed the communication of the necessary information to clarify the situation.

However, Judge John Dorsey approved the motion in favor of the liquidators in March, paving the way for further judicial developments.

FTX contests the request: illogicality and inaccurate data

In an exception filed with the United States Bankruptcy Court in Delaware, FTX’s lawyers described 3AC’s claims as “illogical and unfounded”. According to the defense, 3AC implemented a high-risk strategy on cryptocurrencies, hoping for price increases that did not occur. On the contrary, the market’s fall caused the losses.

Furthermore, FTX criticized the calculation methods of the 1.53 billion dollars, arguing that they are based on:

• Inaccurate account balances as of June 12, 2022;
• Crypto balance of 1.02 billion dollars, lower than the 1.59 billion declared by 3AC;
• Negative amount in US dollars equal to 733 million and not 1.3 billion.

This balance, on which the assumption of practically recovering the entire amount subsequently lost is based, has been defined as a false premise lacking legal and factual validity.

Real sales and contested liquidations

FTX claims that the actual available balance of 3AC was only 284 million dollars. To this are added:

• Declines in market value of cryptocurrencies;
• Withdrawals for 60 million dollars made by the same 3AC.

Regarding the liquidation process, FTX refers to a single event valued at 82 million dollars in cryptocurrencies. This operation would have been “contractually authorized” by the credit and margin agreements, with the aim of maintaining an adequate account balance.

Furthermore, according to FTX, this liquidation would not have reduced the overall balance of the 3AC account, as the value of the liquidated cryptocurrencies would have been converted into fiat currency, bringing a financial stability to the portfolio.

The defense of FTX: a liquidation for the benefit of 3AC

The lawyers of FTX claim that the liquidation actually benefited Three Arrows Capital, preserving the value of the positions in cryptocurrencies and mitigating the risk by moving volatile assets towards a more stable currency like the US dollar.

This position questions the idea that FTX’s operations contributed to the collapse of 3AC, instead suggesting prudent management in a context of extremely volatile markets.

The procedural phase requires that 3AC submit a formal response to FTX’s objection by the upcoming July 11, while the decisive hearing is scheduled for August 12 before Judge Karen Owens.

Implications for the cryptocurrency sector and financial assets

This case represents a significant episode in the regulation and litigation related to digital financial assets, such as cryptocurrencies. The dispute between FTX and 3AC highlights the risks associated with aggressive trading strategies and the legal challenges in managing insolvencies of companies operating in the crypto sector.

The outcome of the proceeding could have a significant impact in terms of legal liability and the definition of operational practices, especially in the context of credit and margin agreements for digital assets.

Perspectives and Lessons from the FTX-3AC Case

The dispute has brought to light some fundamental issues related to risk management and handling of insolvencies in the world of digital financial assets. As a result, important prospects are opening up for greater transparency and regulation in the sector.

Investors and market operators must carefully consider the risk profile of the strategies adopted and the solidity of the contracts signed, so that similar events can be avoided in the future.

In the meantime, it will be essential to follow the evolution of the judicial process between FTX and 3AC to better understand how the courts interpret and judge the complex dynamics of risk and responsibility that characterize the exchange platforms and hedge funds active in the bull and bear cryptocurrency sector.