3AC’s Accusations and FTX’s Response

FTX’s legal team is seeking to fully reject a $1.53 billion claim filed by the defunct hedge fund Three Arrows Capital (3AC), arguing that the losses were the result of 3AC’s own risky trading and should not be covered by FTX’s creditors.

In a recent objection filed in the U.S. Bankruptcy Court for the District of Delaware, FTX described the claim as “illogical and baseless,” asserting that 3AC’s downfall was caused by its aggressive leveraged bets on rising crypto prices, not by any wrongdoing on FTX’s part.

3AC’s liquidators has originally filed a $120 million claim in FTX’s bankruptcy case, only to increase its claim to 1.53 billion, claiming to have found new evidence that FTX liquidated roughly $1.5 billion of 3AC’s assets just two weeks before 3AC's own liquidation process.

3AC argues these transactions were avoidable because FTX has deliberately delayed providing information that could have allowed them to mitigate the losses.

However, FTX disputes both the figures and the narrative. There is also a dispute over the account balance and how 3AC arrived at the $1.53 billion figure.

FTX’s lawyers argue that 3AC’s claim is based on inflated and inaccurate account balances, noting that on June 12, 2022, 3AC’s actual crypto balance was $1.02 billion, not $1.59 billion as claimed.

FTX also purports that 3AC was struggling with a liabilities of $733 million that put greater financial pressure on the company. After a series of market downturns and $60 million in withdrawals by 3AC, FTX claims only $284 million remained—a fraction of the billion-dollar 3AC was trying to claim.

FTX Was Only Trying To Cover Its Loans Not Harm 3AC

At the heart of the dispute is 3AC’s margin trading on the FTX platform in 2022, during a period of market turmoil following the collapse of Terra.

FTX claimed that 3AC breached its agreements with FTX in June 2022. Following the collapse of Terra, which sent the account of balance of 3AC below $240, 3AC hid this fact from FTX and ghost FTX for more than 6 hours.

FTX also cited internal Slack and Telegram logs, which revealed that 3AC actually withdrew $18 million in ETH instead of depositing assets, forcing FTX to liquidate the account to prevent deeper losses.

The liquidation, which recovered $82 million, an action the lawyers say preserved the value of 3AC's asset rather than reducing them as the accounts would've been $18 million underwater at FTX's petition date had the liquidation not occurred.

FTX's Legal Battles continues

FTX’s objection underscores the ongoing legal battles stemming from the 2022 crypto market collapse, with billions in claims and counterclaims still unresolved.

3AC now has until July 11 to respond to FTX’s filing, and a non-evidentiary hearing is scheduled for August 12.

Meanwhile, FTX’s founder Sam Bankman-Fried, convicted of fraud and conspiracy in connection with FTX’s collapse, is now projected to be released from prison in December 2044 after a reduction in his original 25-year sentence for good behavior and participation in prison programs.

He was fined over $11 billion and transferred to a federal facility in Oklahoma after nearly two years in New York custody.