FTX Lawyers Rebuke $1.53B Claim from Three Arrows Capital Liquidators

Legal representatives for collapsed cryptocurrency exchange FTX have contested a $1.53 billion recovery claim submitted by liquidators of hedge fund Three Arrows Capital (3AC). FTX argues the losses stem from 3AC’s “risky strategy” and should not be borne by creditors.

Contents

FTX Lawyers Rebuke $1.53B Claim from Three Arrows Capital Liquidators Claim Expansion and Legal Basis FTX’s Objection: Illogical and Baseless Account Balance Dispute Liquidation Amount Dispute Next Steps

Claim Expansion and Legal Basis

In June 2023, 3AC liquidators initially filed a $120 million claim in FTX’s bankruptcy case. They later increased it to $1.53 billion in November 2024, citing claims for breach of contract, breach of fiduciary duty, and unjust enrichment.

3AC liquidators alleged FTX liquidated $1.53 billion in assets belonging to 3AC in early 2022, contributing to the hedge fund’s collapse. They contended these transactions were avoidable and FTX delayed providing information that would have revealed the liquidations.

Bankruptcy Chief Judge John Dorsey agreed with parts of this argument, granting the liquidators permission to present their case.

FTX’s Objection: Illogical and Baseless

In a filing with the US Bankruptcy Court for the District of Delaware, FTX lawyers dismissed the claim as “illogical and baseless.”

“The Joint Liquidators ask this Court to force other Exchange customers and creditors to foot the bill for 3AC’s failed strategy by asserting illogical and baseless claims for $1.53 billion,” the legal team stated.

FTX lawyers countered that 3AC “bet big” on rising crypto prices, which instead plummeted, making it a victim of its own “risky strategy.”

Account Balance Dispute

Both parties disagree on the actual account balance and the basis for the $1.53 billion figure.

3AC Liquidators’ Position: Assert FTX liquidated funds totaling $1.53 billion.
FTX’s Position: Argues the liquidators’ calculation relies on an inaccurate account balance from June 12, 2022.

FTX asserts the crypto balance on that date was $1.02 billion, not the $1.59 billion used by liquidators, and the negative USD balance was $733 million, not $1.3 billion.

FTX lawyers claim their interpretation of the balance (“available balance” of $284 million) shows 3AC was solvent after the alleged liquidation and that subsequent market fluctuations, not the liquidation, caused losses.

FTX rejects 3AC’s $1.5B claim, citing ‘failed trading strategy’ — *FTX argues liquidators overinflated 3AC account balance figures used in their claim. Source: Kroll Restructuring Administration*

Liquidation Amount Dispute

FTX contends the only liquidation against 3AC was for $82 million in cryptocurrency.

FTX lawyers argue this action was “contractually permitted” to comply with margin requirements.

Crucially, FTX states the liquidation did not decrease the overall account value because the $82 million USD equivalent was credited to the 3AC fiat account.

“FTX’s Argument: The liquidation *preserved* value by moving positions into stable fiat currency.” (Objection filing)

Next Steps

3AC liquidators have until July 11, 2024, to file a reply brief addressing FTX’s objections.

A non-evidentiary hearing regarding the claim is scheduled for August 12, 2024, before Chief Judge Karen Owens of the US Bankruptcy Court for the District of Delaware.